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Rediff.com  » Business » A-I, Boeing to ink purchase deal next week

A-I, Boeing to ink purchase deal next week

January 04, 2006 02:39 IST

National flag carrier Air-India is all set to ink the purchase agreement in the next week with United States aircraft manufacturer Boeing for acquiring 68 aircraft for an estimated Rs 36,000 crore.

The empowered group of ministers recently cleared the fleet purchase deal following rounds of negotiations with manufacturers, securing a concession from overall prices of a little more than Rs 1,000 crore.

"Air-India is likely to sign the purchase agreement with aircraft manufacturer Boeing and engine manufacturers GE and CFM International on January 11," a highly placed source said.

The engines for new long-range wide-bodied state-of-art-technology aircraft are manufactured by GE, while B737-800W aircraft is done by CFM.

Air-India is acquiring 50 new long-range wide-bodied aircraft for Air India and 18 B737-800W aircraft for Air India Charters.

A letter of intent will be placed with Boeing and GE, followed by the signing of a purchase agreement, sources said.

"This will be the single largest order by the airline in its history after it commenced operations in 1953 under the Air Corporations Act. The deliveries are likely to commence from the later part of 2006," they pointed out.

Meanwhile, Air-India has initiated efforts to secure financial support from US Exim Bank for 85 per cent of the total acquisition cost. Air-India has already floated tenders to arrange interim bank loan totalling $429 million for advance payments for 68 aircraft.

"Air-India is raising 15 per cent of the total acquisition cost as an interim loan, while remaining 85 per cent will be sourced from international export-import banks. This 15 per cent is to meet the pre-delivery commitments," a source said.

Following the purchase agreement on January 11, Air-India would make a formal application to US Exim Bank to obtain preliminary commitment from them with a sovereign guarantee.

"This preliminary commitment will be later turned to a final commitment for this Rs 36,000 crore acquisition programme," added.

P R Sanjai in Mumbai
Source: