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777-237LR
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Joined: 19 Dec 2006
Posts: 140
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 Posted: Sun Mar 11, 2007 10:47 pm Post subject: Air India to sell and lease back its A310s |
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Sale and lease back of six A310-300 Aircraft
Air India invites bids under the reverse auction method for the sale and lease back arrangement from prospective lessors/bankers for its six A310-300 aircraft bearing registration Nos. as under. These aircraft were manufactured in the years indicated below:
Aircraft Regd No Year
VT – EJG 1986
VT – EJH 1986
VT – EJI 1986
VT – EJJ 1986
VT – EJK 1986
VT – EJL 1987
· Air India would sell the above aircraft to the lessor/banker and immediately lease it for a period of 5 years. The bidder should indicate the lease rentals per month which AI would required to pay during this period
· Air India would have the first right to either acquire the aircraft at the end of the lease on mutually acceptable terms and conditions or extend the lease by a period of 3 to 5 years.
· Air India would also retain the right to convert any or all of the aircraft into freighters at any point of time at AI’s cost which the lessor/banker should not object.
· In the event of a conversion, the lessor will agree for a rental holiday for the time taken for conversion and the lease would stand extended by the period of the rental holiday.
· In the event of a conversion of any aircraft into freighters, AI would have the right to extend the lease term beyond a period of 5 years. The lease rentals for the extended period should also be indicated
· Air India will not contribute to any maintenance reserves but would maintain these aircraft during the period of lease.
· In the event the lease is renewed at the end of 5 years, you are also required to indicate the lease monthly rental at which it will be renewed.
· Air India should have their option to terminate the lease agreement at any point of time or mutually agreed terms and conditions.
· AI has received a suo moto bid from a banker for the sale of the six aircraft for a total consideration of USD 78 million for this type of sale and lease back arrangement with a lease rental of US$247000 per aircraft per month over a period of 60 months. |
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shivendrashukla
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Joined: 21 Dec 2006
Posts: 1354
Location: Mumbai, India
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| Posted: Sun Mar 11, 2007 11:36 pm Post subject: |
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only 1 question comes to my mind
WHY? |
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Karan69
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Joined: 22 Dec 2006
Posts: 1334
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| Posted: Mon Mar 12, 2007 1:00 am Post subject: |
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ARE U SERIOUS, they are gonna be paying 247,000 a month for these aircrafts per month, as per the last statement.
Lets see how they do buss, maybe Roy this time should file a RTI , if the deal in the same manner as the last statement says so.
They recieve 78 Million USD, but are paying a rental of 247,000 per mth per aircraft for 60 mths
247,000 * 6 [aricrafts] * 60 [mths] = 88920000, that is 88.9 million USD, What sort of business deal is this that too with these tubby old babies, if the transaction goes through they make a loss of nearly 11 million USD.
if i am not missing anything out
Karan |
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VABBy
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Joined: 19 Dec 2006
Posts: 823
Location: DEL
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| Posted: Mon Mar 12, 2007 11:27 am Post subject: |
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I just hope that all the Kabariwallas in Sadar Bazzar / Jama Masjid area dont start bidding for the auction 
Can someone care to explain why they are being auctioned. I guess after 12 years of operations the value of A310 sheer by depreciation wud have been close to zero or in minus wat do u guys reckon
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Nimish
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Joined: 16 Dec 2006
Posts: 9757
Location: Bangalore, India
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| Posted: Mon Mar 12, 2007 11:44 am Post subject: |
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| I think this is a standard business practice to "dress-up" the books for the short term (as they'll get 78m in cash). Most of the airlines in India are following this route of sale and lease back. Basically it's to help with the cash flow situation I guess. |
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the_380
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Joined: 19 Dec 2006
Posts: 2329
Location: Mumbai, India
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| Posted: Mon Mar 12, 2007 12:23 pm Post subject: |
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| Nimish wrote: | | I think this is a standard business practice to "dress-up" the books for the short term (as they'll get 78m in cash). Most of the airlines in India are following this route of sale and lease back. Basically it's to help with the cash flow situation I guess. |
Yes right:
Besides the obvious desire for cash, there are multiple reasons why such transactions can be desirous and beneficial.
A) Airline purchases an aircraft on low terms, and can turn around and sell it at a higher rate at current market values. Basically pocket the profit.
This has been occurring quite frequently as of late, with airlines having achieved heavily discounted airframes post 9/11, now reselling them for handsome profits. Matter of fact, there is one European LCC whom is doing this as standard business practice with its entire new narrow body fleet.
B) Remove the equipment off the balance sheet. Many countries have very favorable accounting and tax benefits in using operating leases over sitting on assets such as aircraft. For many, the ownership and its depreciation benefits are minimal.
C) Retirement of debts. Could be the aircraft was either purchased on has other debts guaranteed by it. If terms or rates are somewhat unfavorable, it can be advantages to pay off such debts. A host of complicated bond type method often finances aircraft.
D) Long term corporate business or fleet plan projection changes.
E) Take advantage of market now by securing a favorable sale price versus many years down the road when you are ready to retire the aircraft. Basically you are gambling that you would earn more by selling the aircraft and making lease payments, then what you would be able to earn selling it down the road.
Lastly, let me make the point that when aircraft are termed as "owned" by airlines in very few cases are owned outright particularly newer aircraft.
Just as we need mortgages to buy a home, airlines enter into very long loan type agreements to acquire new equipment.
Hence a sale-leaseback very often does not provide much of a difference in day-to-day cash needs. The carrier still ends up making some sort of regular payments, while often providing for a one-time significant injection of cash with the sale.
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