Air India Takes Loans from SMBC to Purchase A350-900 Aircraft

Japanese lender Sumitomo Mitsui Banking Corporation (SMBC) said the Tata Group-owned Air India has borrowed USD 120 million (INR 997 Crore) from it to purchase wide-body aircraft from Airbus. The transaction has partly financed Air India's purchase of an A350-900 aircraft from Airbus, which was delivered in October 2023, according to an official statement.

SMBC said this is a secured debt facility through its Singapore branch, while Air India's GIFT City-headquartered arm AI Fleet Services is the borrower. The purchase is part of the mega announcement by the Tatas to buy a total of 470 aircraft from Boeing and Airbus, and Air India has also contributed equity. According to some reports, an Airbus A350-900 aircraft is priced above USD 300 million.

"SMBC Group is pleased to expand upon its long-established relationship with Tata Group through this deal," the lender's country head for India Hiroyuki Mesaki said. He added that this is the bank's first-of-its-kind transaction for an aircraft finance lease.

Nipun Aggarwal, Air India's chief commercial and transformation officer, said the aircraft was among the first deliveries in the company's large aircraft order announced earlier this year." This transaction is also a major step in expanding our aircraft financing business through GIFT City, India's first International Financial Services Centre (IFSC)," Aggarwal added.

The SMBC statement said India is the fifth largest aviation market globally, and the sector is expected to continue growing significantly on tailwinds like the emergence of a large and growing middle class willing to travel. The deal with Air India will aid SMBC in penetrating the fast-growing aviation market, said the bank.

Air India signed USD 70 billion worth of aircraft deals with Airbus and Boeing earlier this year for 470 aircraft. The first of these, Airbus A350 planes, is scheduled to arrive this month. The order for Boeing has 190 B737 MAXs, 20 B787s, and 10 B777s aircraft. The Airbus order comprises 210 A320 family and 40 A350 planes. A350, B777, and B787 are wide-body aircraft that have bigger fuel tanks.

Earlier, Air India secured funds worth INR 14,000 crore from the State Bank of India and Bank of Baroda through a mix of fresh loans and refinance of existing debt. The fundraising comprised INR 12,500 crore to refinance loans and Rs 1,500 crore obtained through the pandemic-era Emergency Credit Line Guarantee Scheme (ECLGS), media reports said.

Besides, it was also reported that Air India was in talks with multiple commercial banks for an INR 3,000-crore loan, which it is seeking to make down payments to lessors under sale-and-leaseback (SLB) agreements.

Air India Receives DGCA Approval for A350 & A320 Engineering Line Maintenance

Air India has recently secured the Directorate General of Civil Aviation's (DGCA) approval for engineering line maintenance of A350 and A320 aircraft. This regulatory clearance paves the way for the seamless operation and maintenance of the six A350 aircraft, with the first one expected to land by the end of December.

The DGCA's approval is a crucial milestone for Air India, signifying that its maintenance, repair, and overhaul (MRO) processes and systems have been thoroughly examined and certified to meet airworthiness requirements. The Civil Aviation Regulation (CAR) 145 certification assures that Air India's MRO operations comply with safety and efficiency standards set by the regulatory body.

Ahead of the arrival of the A350, Air India's engineering team has undergone extensive training and preparation to ensure that all required inspections, maintenance, and repairs can be efficiently carried out at their facilities. Training sessions at the Airbus centre in Toulouse involved collaboration between Air India, Vistara, and AIX Connect teams, focusing on Structure Assessment and Engine Run-Up.

Air India emphasized that senior executives from the Engineering department underwent a comprehensive A350 General Familiarization Course, ensuring a deep understanding of the aircraft. Technicians were also part of extensive training in General Familiarization to guarantee the smooth servicing and operation of the A350 aircraft.

The Russian aviation industry has faced significant challenges since Western sanctions were imposed in response to Moscow's invasion of Ukraine. This article delves into the measures Russia has taken to sustain its aviation sector, the financial investments made, and the hurdles it faces in achieving self-sufficiency.

State Subsidies and Loans: A Lifeline for Aviation

Russia has allocated over $12 billion in state subsidies and loans to buoy its aviation sector, which was hit hard by the cessation of key parts and maintenance services from Western suppliers. These measures, initiated in the wake of sanctions, underscore the Kremlin's commitment to maintaining control over a pivotal industry.

The Impacts of Sanctions on Aviation

Western planemakers Airbus and Boeing ceased supplies and maintenance support in March 2022, affecting flagship carrier Aeroflot and other Russian airlines. The subsequent struggle to secure spare parts led Russia to spend 1.09 trillion roubles ($12.07 billion) to support civil aviation, nearly double the payments made during the COVID-19 pandemic.

Presidential Vision and Industry Challenges

President Vladimir Putin acknowledged the strain on the aviation fleet, predominantly composed of foreign-made planes. Expressing the need for self-sufficiency, Putin outlined plans to produce over 1,000 aircraft domestically by 2030. However, achieving this goal poses a significant challenge, given the current reliance on foreign-manufactured aircraft.

Current Landscape and Industry Response

Russian airlines presently operate 991 aircraft, with only 133 being Superjets from the state-owned United Aircraft Corporation. While state support for aircraft manufacturing is promised, the emphasis is on sales support, production capacity expansion, and post-sales service system creation.

Electoral Pressures and Reputational Risks

With elections approaching, the collapse of an airline could exert reputational and electoral pressure on Putin. The aviation industry's reliability is crucial for transporting people and goods across Russia, and maintaining a positive narrative about the minimal impact of sanctions.

Funding Sources and Resilience

Russia has tapped into reserve funds, spending 110 billion roubles in 2022 to compensate airlines for fuel cost increases. The National Wealth Fund (NWF) has played a significant role, disbursing almost 400 billion roubles for aviation spending in 2023. This spending, equivalent to just under 1% of projected GDP for 2023, underscores the financial commitment.

Safety Concerns and Creative Solutions

To keep Western jets operational, Russian airlines have resorted to a grey import scheme, importing spare parts without manufacturers' consent. While passenger numbers are recovering, concerns about safety persist due to the loss of foreign parts and maintenance expertise. Some airlines have even stripped airplanes for parts, signaling the severity of the situation.

Future Prospects and Strategic Spending

Russia's domestic air passenger traffic is rebounding, aided by a government-introduced grey import scheme. The strategic spending plans for aviation, outlined in a government document, highlight the need for at least 711 billion roubles to achieve technological independence from foreign suppliers. Moscow aims to use 300 billion roubles in 2023 for buying aircraft from foreign lessors.

Conclusion

Russia's aviation sector is at a critical juncture, balancing state support, the quest for technological independence, and the challenges posed by sanctions. As the country endeavors to secure its aviation future, the resilience of the industry and the success of strategic spending will shape the narrative of Russia's self-sufficiency in aviation.

With Inputs from Reuters

Unions representing ground service workers at Iberia, an International Airlines Group-owned airline, have decided to postpone a planned strike at Spanish airports during the New Year period. The two main unions involved, UGT and CCOO, delayed the walkouts scheduled from December 29 to January 1 and January 4-7.

This decision comes after the Spanish government agreed to mediate in the ongoing conflict between the unions and the airline operator. The dispute revolves around contracts signed with new service providers in September, prompting protests from Iberia's ground service workers.

Government Mediation

The UGT and CCOO unions announced the postponement in a statement on December 20, 2023. According to CCOO, the Spanish government's willingness to act as a mediator in the conflict played a pivotal role in the decision. This move suggests a commitment to resolving the issues at hand through dialogue and negotiation rather than through industrial action.

Contract Disputes

Iberia's ground service workers, including baggage handlers, at Spanish commercial airports—operated by the state-controlled Aena (AENA.MC)—are protesting against contracts signed with new providers in September. Aena's decision to hire new contractors for services previously handled by Iberia at various airports has sparked discontent among the unions. Despite assurances from the new suppliers that they would retain workers and maintain their working conditions, the unions remain dissatisfied.

Iberia's Perspective

The airline has expressed its stance on the matter, deeming the strike as irresponsible and lacking justification. Iberia contends that the decision to hire new contractors was a strategic move, and the unions' opposition may affect not only the airline but also other carriers. The airline is likely to continue engaging with the unions and the government to find a resolution that addresses the concerns of all parties involved.

No Set Date for Strikes

While the unions have decided to postpone the strikes, they have not announced a new date for the industrial action. This uncertainty leaves room for continued negotiations and discussions between the involved parties. The willingness to engage in dialogue and mediation demonstrates a recognition of the importance of finding a mutually agreeable solution to the ongoing disputes.

Conclusion

The postponement of the planned strikes by Iberia's ground service workers reflects a temporary reprieve in what has been a contentious labor dispute. With the Spanish government stepping in as a mediator, there is hope for a resolution that addresses the concerns of the unions and Iberia alike. The aviation industry, already grappling with challenges, will be closely watching for further developments in this ongoing saga.

With Inputs from Reuters

In a significant development, Boeing is poised to restart deliveries of its 787 Dreamliner to China, marking a pivotal step that could potentially lead to the end of a more than four-year freeze on deliveries of the Boeing 737 MAX in the country.

The resumption comes after a series of safety concerns and regulatory hurdles that ensued following the tragic crashes of the 737 MAX in 2018 and 2019. This move is anticipated to not only strengthen Boeing's presence in one of the world's most crucial aerospace markets but also signifies a renewed trust in the safety of Boeing aircraft.

Background and Suspension of Deliveries

Boeing's operations in China faced a substantial setback in 2019 when deliveries of its aircraft, particularly the 737 MAX, were halted in the aftermath of two fatal crashes. The global grounding of the 737 MAX ensued, prompting heightened scrutiny and regulatory concerns worldwide. The Civil Aviation Administration of China (CAAC) suspended Chinese orders and deliveries of Boeing planes, including the lucrative 787 Dreamliner, pending safety reassurances.

Juneyao Airlines to Receive 787 Dreamliner

Sources indicate that Juneyao Airlines, a prominent privately-owned Chinese carrier, is set to receive a new 787 Dreamliner from Boeing's facilities in Seattle. This move, scheduled to take place within days, serves as a notable signal of the resumption of Boeing's deliveries to China. The significance of this delivery is underscored by its potential to pave the way for the clearance of deliveries for the Boeing 737 MAX, a critical component of Boeing's global portfolio.

Key Clearance from China's Aviation Regulator

Recent reports from The Air Current suggest that Boeing has secured a key clearance from China's aviation regulator, the CAAC. This clearance is seen as a crucial step towards the reinstatement of 737 MAX deliveries to China. The regulator's decision is a testament to the collaborative efforts between Boeing and Chinese aviation authorities to address safety concerns and restore confidence in Boeing's aircraft.

Current Status and Future Prospects

While the safety bans on existing 737 MAX planes have been lifted, new deliveries have been on hold pending regulatory approvals. Boeing remains optimistic about the future, expressing its commitment to supporting its customers in China. The company's readiness to resume deliveries underscores its strategic vision, as China is projected to contribute significantly to the global demand for aircraft through 2042.

Next Steps and Regulatory Approvals

The recent clearance from the CAAC is a positive development, but individual 737 MAX deliveries to China still require approval from the National Development and Reform Commission (NDRC). Analysts suggest that the recent flight of a 737 MAX designated for China Southern Airlines from Boeing Field in Seattle may indicate progress, possibly a customer acceptance flight, a customary test flight before final delivery.

Conclusion

Boeing's imminent resumption of deliveries to China represents a crucial turning point in the aerospace industry. The collaborative efforts between Boeing and Chinese aviation authorities to address safety concerns underscore the commitment to ensuring the highest standards of safety in air travel. As Boeing takes steps to re-enter one of the world's most significant aviation markets, the industry watches closely, anticipating a renewed era of cooperation and growth.

With Inputs from Reuters

Ethiopian Airlines, one of Africa's most successful indigenous carriers, has successfully secured a $450 million loan from Citibank to facilitate the acquisition of five new Boeing aircraft. This landmark loan agreement will see the addition of three Boeing 737 MAX 8s and two Boeing 777 Freighters to Ethiopian Airlines' fleet, bringing the total number of planes to over 150.

Decade's Largest Aircraft Financing for Ethiopia

The financing deal, announced on December 12, 2023, is not only a significant milestone for Ethiopian Airlines but also represents Citibank's largest aircraft financing in Ethiopia within the last decade. The long-standing partnership between Citi and Ethiopian Airlines, spanning 45 years, has been a key driver in making this substantial financial arrangement possible.

Details of the Loan and Aircraft Acquisition

The $450 million loan will be secured against the value of the five planes, emphasizing the confidence that Citibank has in Ethiopian Airlines' operational success and growth trajectory. The newly acquired aircraft include three Boeing 737 MAX 8s, known for their fuel efficiency and advanced technology, and two Boeing 777 Freighters, designed for efficient and reliable cargo transportation.

All five aircraft are set to be delivered in December 2023 in the State of Washington, where Boeing is headquartered. This delivery location underscores the global nature of the aviation industry and highlights the collaboration between Ethiopian Airlines and Boeing.

Strategic Growth and Fleet Expansion

Mesfin Tasew, Ethiopian Airlines Group CEO, expressed his satisfaction with the agreement, stating, "Fleet expansion being one of our strategic growth pillars, we will continue expanding and modernizing our fleet size so as to grow our business and reach new markets." Ethiopian Airlines aims to have a fleet exceeding 270 aircraft by 2035, showcasing its ambitious vision for the future.

Citi's Role in Supporting Growth

Akin Dawodu, Citi Sub Saharan Africa Head, highlighted the bank's commitment to supporting Ethiopian Airlines' growth, stating, "Citi has been serving Ethiopian Airlines for many decades, and we are pleased to support its growth with financing for five new aircraft." Dawodu emphasized the importance of strong relationships and global connectivity in making this deal a reality.

Current Fleet and Future Aspirations

Ethiopian Airlines' current fleet consists of Boeing 737s, 777s, 787s, Airbus A350-900s, and Bombardier Dash 8-400 planes. The addition of the new Boeing aircraft will not only enhance the airline's operational capabilities but also contribute to its goal of becoming a leading player in the aviation industry.

Conclusion

Ethiopian Airlines' successful securing of a $450 million loan from Citibank marks a significant step towards achieving its ambitious growth targets. The partnership between the airline and the bank continues to thrive, with the financing deal representing a testament to the enduring strength and mutual benefit of their collaboration. As the aviation industry evolves, Ethiopian Airlines remains at the forefront, poised for further expansion and success on the African and global stages.

In a strategic move to enhance its short and medium-haul fleet, Lufthansa Group's Supervisory Board announced a decisive order for an additional 40 Airbus A220-300s on December 19, 2023. This development solidifies the long-standing collaboration between Lufthansa Group and Airbus, marking a significant milestone in their history of cooperation and innovation in the aviation industry.

A Steadfast Partnership

Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG, expressed enthusiasm about the latest order, emphasizing the unique partnership with Airbus. Lufthansa Group, as the largest airline customer, recently celebrated the delivery of its 600th aircraft from Airbus, highlighting the strength of their relationship. Spohr anticipates the delivery of the 700th aircraft and underscores the anticipation of customers for these modern, economical, and fuel-efficient additions to the fleet.

Historical Perspective

The Lufthansa Group has been a pioneer in embracing Airbus aircraft, dating back to the A300 in the 1970s. Over the years, the group has operated various members of the Airbus product family, including the A220, A320-Family, A330/A340, A350, and the iconic A380. This latest order reinforces the enduring partnership between Lufthansa and Airbus, underscoring the airline's commitment to modern and diverse fleet options.

A220's Success Story

The A220, a clean sheet design aircraft, has been an integral part of the Lufthansa Group's fleet since 2016 when SWISS, a subsidiary of the group, introduced the first aircraft into scheduled service. Christian Scherer, Chief Commercial Officer and Head of Airbus International, commended the Lufthansa Group for its continued confidence in the A220. Designed for the 100-150 seat market, the A220 is celebrated for its efficiency and plays a crucial role in supporting Lufthansa Group's airline development and sustainability objectives.

Efficiency and Sustainability

The A220-300, the latest addition to the A220 family, accommodates 120 to 150 passengers on flights covering up to 3,400 nautical miles (6,300 km). Noteworthy is its impressive 25% lower fuel burn and CO2 emissions per seat compared to previous generation aircraft, aligning seamlessly with the industry's increasing focus on environmental sustainability. The A220's commitment to eco-friendly operations is further emphasized by its capability to operate with up to 50% Sustainable Aviation Fuel (SAF), with all Airbus aircraft set to achieve up to 100% SAF compatibility by 2030.

Global Success and Future Prospects

As of November, Airbus has secured 849 orders for the A220 from 31 customers, with 303 already delivered. Currently, the A220 is operational with 18 airlines worldwide, covering a vast network of over 1,350 routes. The aircraft's success is a testament to its innovative design, fuel efficiency, and operational flexibility.

Conclusion

Lufthansa Group's firm order for an additional 40 A220-300s not only reinforces its commitment to Airbus but also highlights the pivotal role the A220 plays in the group's growth strategy and sustainability objectives. This strategic move sets the stage for continued success in the evolving landscape of the aviation industry, where efficiency, innovation, and environmental responsibility are paramount. The partnership between Lufthansa Group and Airbus stands as a shining example of collaboration driving progress in the aviation sector.

With Inputs from Airbus