Air India makes advance payment to Boeing for 220 aircraft: CFO Hejmadi
Air India Chief Financial Officer Vinod Hammadi said on Friday that Air India has made pre-delivery payments to US aircraft maker Boeing for 220 aircraft it has ordered.
Pre-delivery payments (PDPs) are premiums that the airline must pay to the manufacturer when the aircraft is built. It can amount to about 30 percent of the price of the plane.
A year after its acquisition by the Tata Group, Air India in February placed an order for 470 planes – 250 with European planemaker Airbus and 220 with Boeing – in the world’s largest single-slide aircraft order. The list price for 220 Boeing planes is about $34 billion.
In a message to the employees, Hammadi said, “I am pleased to inform you that yesterday Air India made a PDP payment to Boeing for the aircraft deal. This was the largest deal in the history of Air India. The money was arranged from several banks at a very competitive rate and converted into US dollars at the best the prices “.
He said the airline had an “extremely short period” to arrange the funds and that the entire transaction had been ably executed by the finance department and commercial department.
Air India CEO and Managing Director Campbell Wilson also paid tribute to the airline executives who were involved in closing the deal.
I would like to commend the Commercial, Strategic, Finance, Treasury and Legal procurement teams for successfully putting together a significant financing deal relating to our new fleet in a remarkably quick time. I won’t go into details, but it was another historic achievement for the new Air India. Well done to everyone involved,” noted Wilson.
From Boeing, the Tata Group-operated airline has ordered 10 B777X wide-body, 20 B787 wide-body and 190 narrow-body B737MAX aircraft, with an option for an additional 20 B787s and 50 B737MAXs. The wide-body aircraft has a larger fuel tank, which allows it to go straight over longer distances such as the India-US routes.
Wilson mentioned that the Air India teams went to Hamburg, Germany this week for the Indoor Aircraft Show. He noted that these teams “checked the latest and greatest seats, in-flight entertainment options and equipment for our large fleet of new aircraft.”
“The lead time for a custom seating design is long and measured in years, so it will be a rolling journey to get to the final state, but having joined the team for a day, I am really excited about what we will finally be able to offer our customers!” He said.
Civil Aviation Minister Jyotiraditya Scindia last month praised the Tata Group for taking a “major step forward” by ordering 470 aircraft. “I urge his compatriots (other Indian airlines) to do the same because there is a lot of competition happening on the domestic side, where margins and revenue are slim. Airlines are very comfortable competing on the domestic side because volatility is low,” Scindia noted.
On the international side, the revenue is much higher. Your CASK (unit cost) is limited and your RASK (unit revenue) is higher on international routes. But the fluctuations are much greater.
“Therefore, the time has come, and I appeal to Indian airlines to take risks and face volatility because the flag of India should fly in the international space,” Scindia said.