Aviation

Air India now wants to buy planes instead of leasing them

DELHI

National air carrier Air India is proposing to shift from its current sale and leaseback agreement to outright purchase of 15 of the 27 Dreamliner aircraft it has ordered. It says that this will help it save $225-300 million as part of the turnaround plan and has sent a proposal for government approval.

The airline says that while leaseback is more expensive in the long run, an airline also does not get the benefit of the residual value of an aircraft after the lease’s expiry. Sale and leaseback are financial transactions where one sells an asset and leases it back on a long term and continues to use it without owning it.The planes have to be returned to the lessor after the lease is over.

The sources said the redelivery cost (after the lease expires) of a widebody aircraft like the Dreamliners is also very high at almost $20 million while for narrow-bodies it is about $10-12 million. Such high redelivery costs too would be avoided if the planes are owned by the company, the officials said. Air India, which has seven aircraft on leaseback and has offered five more through that process, now plans to turn to the outright purchase mode for the remaining 15, they said.

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