Japan's SMBC lends $120 mn to Air India to buy A350-900 aircraft

Aircraft secured debt facility struck in GIFT City, says lender

Japan’s Sumitomo Mitsui Banking Corporation (SMBC) is lending $120 million to Tata group’s Air India to purchase an A350-900 aircraft from Airbus.

The transaction was done at Gujarat International Finance Tec-City (GIFT City) with the assistance of Air India’s wholly owned subsidiary AI Fleet Services Ltd. It is part of Air India’s order of 470 aircraft placed earlier this year, said SMBC in a statement.

The aircraft secured debt facility was closed through SMBC’s Singapore Branch. Air India has also put in the equity component for the aircraft. SMBC was the sole bank in the transaction.

Hiroyuki Mesaki, country head of SMBC India, said the bank completed the aircraft secured debt facility through an innovative GIFT City structure amid a fast-growing Indian market. It is the bank’s first aircraft finance lease transaction of its kind.

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Earlier, Air India acquired the country’s first Airbus A350-900 aircraft through a finance lease transaction with HSBC in GIFT City.

India is the fifth largest aviation market globally, expanding by the emergence of a large middle class. The aviation sector is expected to continue growing, as evidenced by the large orders placed by carriers to meet rising demand. The deal with Air India will aid SMBC in penetrating the fast-growing aviation market, said the bank.

Nipun Aggarwal, chief commercial and transformation officer at Air India, said the transaction is a major step in expanding the aircraft financing business through GIFT City, India’s first International Financial Services Centre.