IndiGo inks $2.6-billion pact with Chinese bank

The arrangement will help low-cost carrier IndiGo finance more than 30 new aircraft

 

India’s largest no-frills carrier IndiGo signed a Memorandum of Understanding (MoU) with Industrial and Commercial Bank of China Ltd (ICBC). Under the pact with IndiGo, ICBC, China’s largest commercial bank, will finance the airline’s plans to purchase 30 aircraft. The deal size is valued at $2.6 billion.

Currently, IndiGo has 81 Airbus A320 planes and the airline operates some 500 flights daily. In 2005, IndiGo placed an order for 100 Airbus A320s followed by another order for 180 planes (150 A320neos and 30 A320s) in 2011.

FLYING HIGH

• Currently, IndiGo has 81 Airbus A320 planes and the airline operates some 500 flights daily
• In 2005, IndiGo placed an order for 100 Airbus A320s followed by another order for 180 planes (150 A320neos and 30 A320s) in 2011
• Under the MoU, ICBC will provide financing for the planes through either sale and leaseback, financial lease or commercial lending

IndiGo is not listed and does not publicise annual reports. According to the airline’s balance sheet for the year ending March 2013, it had long-term borrowings of Rs 1,617 crore and this included foreign currency term loans (Rs 276 crore) and aircraft finance lease obligations (Rs 1,340 crore).

The interest rate for term loans was pegged at Libor-plus-premium carried. The balance sheet shows that some of the term loans were secured against the assignment of certain rights under aircraft purchase agreement signed with Airbus.

The announcement of MoUs, signed at an India-China business meeting organised by the Federation of Indian Chambers of Commerce and Industry, coincides with Chinese President Xi Jinping’s three-day visit to India. Xi arrived in Ahmedabad on Wednesday.

“Through this MoU, ICBC will provide IndiGo financial solutions for the introduction of A320 and the other family of aircraft to the fleet in the form of sale and lease back or financial lease or commercial lending. The number of aircraft would be about 30 and the value of the deal would reach to the amount of $2.6 billion,” said Aditya Ghosh, president, IndiGo.

Under the MoU, ICBC will provide financing for the planes through either sale and leaseback, financial lease or commercial lending, IndiGo said in a statement here.

IndiGo already has a relationship with ICBC and this new effort will cement the relationship, the statement added.