Print from Airliners.net discussion forum
http://www.airliners.net/aviation-forums/general_aviation/read.main/5579238/

Topic: AI Gets Boeing Loan For (1) 787
Username: rotating14
Posted 2012-10-04 08:46:17 and read 12746 times.

http://www.bloomberg.com/news/2012-1...on-for-787-airfinance-journal.html

Quote:
Boeing Co. (BA) will lend Air India Ltd. $100 million to help finance the purchase of its third 787 jet, Airfinance Journal reported, citing an unidentified official at the Indian carrier.
India’s national airline is looking for $500 million in bridge financing for the the acquisition of four 787s before the airline concludes sale and leaseback agreements with aircraft lessors, the publication said today.

The woes of AI continue with this new revelation of monies being loaned by Boeing Capital to help AI finance a sole 787-8. Here we go!

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: aloges
Posted 2012-10-04 08:55:05 and read 12692 times.

Apparently, their next complaint will be that Boeing's money does, in fact, stink.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: Stitch
Posted 2012-10-04 08:58:06 and read 12676 times.

This is certainly not the first time Boeing has used Boeing Capital to help fund a deal. As I recall, they're financing El Al's two 787-8s.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: rotating14
Posted 2012-10-04 09:18:11 and read 12561 times.

But isn't financing supposed to be already set and in place according to some A.netters with inside info?

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: lightsaber
Posted 2012-10-04 09:31:47 and read 12480 times.

Wait a second, we've been told AI had the funding lined up for the next 4 787s. Something does not compute...

Quoting rotating14 (Reply 3):
But isn't financing supposed to be already set and in place according to some A.netters with inside info?

Since there has been no press release, I suspect the terms of the financing were not really agreed to.

Seriously, who would loan money to AI? If one had to reposes the 788, that would be a political nightmare with the GoI. It takes someone with deep pockets (Boeing) to take that type of risk. The small leasing companies could be driven into bankruptcy by such a deal.

Quoting rotating14 (Thread starter):
to help finance the purchase of its third 787 jet

Serious question, when could Boeing divert airframes to other customers? I'm aware that the already built airframes and probably the next 3 airframes scheduled for production are 'too late' to change. But what is the lead time for the cabin fittings? Six months? A year? I would not think that Boeing would want a repeat of the 777s parked nose to tail when other airlines are hungry for the 787.

Quoting Stitch (Reply 2):
they're financing El Al's two 787-8s.

For political reasons, that doesn't surprise me. Then again, El Al has much less risk than AI. Boeing will pursue *some* deals for the financing profit too.   

Lightsaber

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: Stitch
Posted 2012-10-04 09:57:43 and read 12336 times.

I know AI has been looking for "bridge financing" to allow them to take delivery of the planes so they can then sell and lease them back.

Is the problem still finding the bridge loans, or is AI now having an issue finding a company willing to buy the planes and lease them back?

AI does have the backing of the US Export-Import Bank, but is that funding guarantee only for the sale and lease-back transactions?

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: something
Posted 2012-10-04 10:06:44 and read 12298 times.

Maybe a friendly financing deal was part of the compensation?

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: Stitch
Posted 2012-10-04 10:24:36 and read 12239 times.

Quoting something (Reply 6):
Maybe a friendly financing deal was part of the compensation?

If it was, why all the drama? And why only 1 plane out of 25 (as 2 already have financing)?

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: lightsaber
Posted 2012-10-04 11:22:32 and read 12077 times.

Quoting Stitch (Reply 7):
Quoting something (Reply 6):
Maybe a friendly financing deal was part of the compensation?

If it was, why all the drama? And why only 1 plane out of 25 (as 2 already have financing)?

I second this questions. This situation 'does not compute' with prior statements on 787 and AI financing.


What type of company buys billions in equipment and doesn't line up the financing far in advance?

Quoting Stitch (Reply 5):
AI does have the backing of the US Export-Import Bank, but is that funding guarantee only for the sale and lease-back transactions?

The issue is probably the down payment required for Export-Import bank financing. IIRC 20%. However, the generic Ex-Im states 15%:

http://manufacturing-works.com/ex_im_bank/

But then I find the Ex-Im bank only funds to the US content of an export, which could mean a high down payment for the 787...

India wants a bank/leasing company to accept a lower down payment (refund cash to AI/GoI). Since repossessing these aircraft would be next to impossible, who is willing to loan?


Lightsaber

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: Stitch
Posted 2012-10-04 11:25:20 and read 12069 times.

Quoting lightsaber (Reply 8):
What type of company buys billions in equipment and doesn't line up the financing far in advance?

To be fair, much of this whole saga appears to be driven by the machinations of the bureaucracy of the Government of India as opposed to gross incompetence by the management team at Air India.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: lightsaber
Posted 2012-10-04 11:38:21 and read 11990 times.

Quoting Stitch (Reply 9):
much of this whole saga appears to be driven by the machinations of the bureaucracy of the Government of India as opposed to gross incompetence by the management team at Air India.

Agreed. But the problem is that AI needs help from the GoI to secure the financing.

I keep having hope that AI will reform and get its business practices up to best practices. This financing drama shows that they are not ready yet. It doesn't matter if it is the GoI; that is just part of how AI operates. Globalization has forced everyone to play nearly on the same playing field. At some point AI, with or without GoI 'help' will have to also.

I would like to see AI doing better. I would like to see the 787s make their way into service. Instead... drama.

Lightsaber

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: rotating14
Posted 2012-10-04 12:21:16 and read 11862 times.

Quoting Stitch (Reply 5):
Is the problem still finding the bridge loans, or is AI now having an issue finding a company willing to buy the planes and lease them back?

I'm guessing the problem is that they can't find anybody to deal the 787's to. Just like the 777's they are trying to unload. People are now wary that dealing with AI or the Indian Gov't is just a pain in the A$$. They did it to themselves.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: lightsaber
Posted 2012-10-04 13:31:14 and read 11648 times.

Quoting rotating14 (Reply 11):
People are now wary that dealing with AI or the Indian Gov't is just a pain in the A$$. They did it to themselves.

Again, I state, who could afford to reposes the planes? Most of the companies that could afford the financial risk will not want the political risk. As you noted, AI has done it to themselves.

Lightsaber

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: aeroblogger
Posted 2012-10-04 15:59:25 and read 10185 times.

Quoting rotating14 (Reply 3):
But isn't financing supposed to be already set and in place according to some A.netters with inside info?

Correct. However, the Ministry of Finance is not releasing the money. So I guess Boeing is coughing up the money themselves until AI and MoF get their issues sorted out.

Hopefully this will mean that VT-ANI can be delivered soon.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: tdscanuck
Posted 2012-10-04 18:12:11 and read 9283 times.

Quoting lightsaber (Reply 4):
Serious question, when could Boeing divert airframes to other customers? I'm aware that the already built airframes and probably the next 3 airframes scheduled for production are 'too late' to change. But what is the lead time for the cabin fittings? Six months? A year?

It's about six months. With extraordinary efforts it could be shortened but a lot of the BFE suppliers (seats, IFE, etc.) are running about six months ahead. It's a whole lot simpler if the diversion customer already has an airplane in the pipeline (in which case you're just pulling existing orders ahead a little bit). Trying to insert someone new in an existing spot is tricky.

Tom.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: Darksnowynight
Posted 2012-10-04 18:25:41 and read 9170 times.

Quoting lightsaber (Reply 12):

Quoting rotating14 (Reply 11):
People are now wary that dealing with AI or the Indian Gov't is just a pain in the A$$. They did it to themselves.

Again, I state, who could afford to reposes the planes?

While it is an unmitigated pain in the vas deferens, aircraft repossession is not that dramatic. I do agree that under no circumstances should any financing be made to AI, but picking up a defaulted aircraft is a more regular process than that. Even with India in the backdrop (which it wouldn't necessarily have to be either; a lot of airports are surprisingly cooperative when a request to impound is sent along the proper channels).

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: YULWinterSkies
Posted 2012-10-04 18:36:43 and read 9061 times.

Quoting lightsaber (Reply 8):
What type of company buys billions in equipment and doesn't line up the financing far in advance?

Let me think.... how about Air India?

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: aeroblogger
Posted 2012-10-04 19:20:22 and read 8748 times.

Quoting Stitch (Reply 7):
If it was, why all the drama? And why only 1 plane out of 25 (as 2 already have financing)?

The financing is already done. The problem is that Ministry of Finance has frozen the bridge loan so AI cannot pay Boeing yet. I guess Boeing has agreed to loan AI the money until MoF unfreezes the bridge loan.

The next delivery isn't expected until the end of the month, by which point the MoF/MoCA freezing nonsense will be sorted out.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: comorin
Posted 2012-10-04 19:39:29 and read 8614 times.

The whole AI saga has dramatically affected the perception of Brand India in the business world. Unfortunately, AI is an accurate representation of the real India that Indians have to face on a daily basis. It indeed is a pity that high-aspiration ventures like 9W and IT are not able to redefine the aviation sector.

The Boeing loan is not a big deal, $100M is chump change for all concerned, and well collateralized. The more fundamental issue is to find a leasing company that will extend credit to AI, given its sorry state. Try seizing a vessel from a nation with the world's fifth biggest air force....

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: lightsaber
Posted 2012-10-04 21:44:50 and read 7820 times.

Quoting aeroblogger (Reply 13):
However, the Ministry of Finance is not releasing the money.

Will they ever get it smooth? What stops any future delivery from being held up? I think we all know this drama isn't over yet. Once it is settled, what assures there isn't a 'relapse?'

Quoting tdscanuck (Reply 14):
It's about six months. With extraordinary efforts it could be shortened but a lot of the BFE suppliers (seats, IFE, etc.) are running about six months ahead. It's a whole lot simpler if the diversion customer already has an airplane in the pipeline (in which case you're just pulling existing orders ahead a little bit). Trying to insert someone new in an existing spot is tricky.

Thank you. That implies any airframe less than 7 months out should go ahead and be produced at risk for AI. However, later airframes... Note: I do not think Boeing will do anything at this time, but eventually the business case will force a change.

Quoting aeroblogger (Reply 17):
The financing is already done. The problem is that Ministry of Finance has frozen the bridge loan so AI cannot pay Boeing yet.

There is a disconnect in those two sentences. The financing is not done if the money is not being released.

Quoting comorin (Reply 18):
The Boeing loan is not a big deal, $100M is chump change for all concerned, and well collateralized.

85% guarantee by the Import/Export Bank. So Boeing just needs to raise their prices.  
Quoting comorin (Reply 18):
Try seizing a vessel from a nation with the world's fifth biggest air force....

Exactly. Now, Boeing makes a profit off of that Air Force, so they will deal (and ground some of their capability if the payments fall too far behind...). But lack of ability to seizing an aircraft makes the collateral... not so valuable unless that company is done doing business in India... And Boeing's bond rating will be at risk if they finance too many.

Good credit rating airlines are doing their own financing as that is the cheapest way.

Or has the resources to 'stare down' the GoI. e.g., in the economics book "The World is Flat" by Thomas Freidman, United Technologies was in a position where they were losing big money due to the Pakistan/India stand off. UTX did a simple solution, as did other impacted companies, of moving jobs (backoffice IT) to other nations fairly rapidly (and for multi-year contracts). India finally met UTX's demand that they stop 'saber rattling' and hurting business. The prior book "The Lexus and the Olive Tree" uses Dell vs. China (Michael Dell won, FWIW). So it is possible, but only with the largest companies. I'm not sure ALC could go toe to toe (yet), but perhaps GECAS?

Lightsaber

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: Pellegrine
Posted 2012-10-04 22:39:05 and read 7498 times.

What a joke beyond belief.

Quoting Stitch (Reply 5):
Is the problem still finding the bridge loans, or is AI now having an issue finding a company willing to buy the planes and lease them back?

It is a problem.

Quoting lightsaber (Reply 8):
who is willing to loan?

If you were a commercial bank or lessor...would you???!!!

Quoting comorin (Reply 18):
The whole AI saga has dramatically affected the perception of Brand India in the business world.

  

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: blueflyer
Posted 2012-10-05 02:23:06 and read 6274 times.

Quoting Stitch (Reply 7):
And why only 1 plane out of 25 (as 2 already have financing)?

Because Boeing Capital wants to make sure a sale-and-lease-back agreement will indeed be executed and they will be repaid promptly before sticking their neck out for more, perhaps?

Quoting lightsaber (Reply 12):
Again, I state, who could afford to reposes the planes?

Obviously, one option is to try and reposes the planes while outside of India, however it is a one-time shot as Air India is likely to move all its 787s into its domestic network if one gets impounded while overseas.

Quoting Pellegrine (Reply 20):
If you were a commercial bank or lessor...would you???!!!

Financial markets can be quite creative to get a deal done even in difficult conditions. Options include getting the Indian government to secure the note, using collateral outside India instead of or in addition to the plane (offices, bank accounts, landing/take-off slots, etc...), a syndicated loan (several banks providing each a portion of the funds so each bank's exposure is limited), and many more.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: Revelation
Posted 2012-10-05 04:36:13 and read 5568 times.

Quoting lightsaber (Reply 4):
Seriously, who would loan money to AI? If one had to reposes the 788, that would be a political nightmare with the GoI. It takes someone with deep pockets (Boeing) to take that type of risk. The small leasing companies could be driven into bankruptcy by such a deal.

I imagine that Boeing is trying to give the aura of confidence by putting its own money on the line, but instead it may be viewed as desperation - Boeing lending money that gets paid to Boeing, just to move its own merchandise.

Quoting comorin (Reply 18):
Try seizing a vessel from a nation with the world's fifth biggest air force....

No worries, there are enough people in the loop who accept bribes.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: Stitch
Posted 2012-10-05 06:41:19 and read 4780 times.

Quoting Revelation (Reply 22):
I imagine that Boeing is trying to give the aura of confidence by putting its own money on the line, but instead it may be viewed as desperation - Boeing lending money that gets paid to Boeing, just to move its own merchandise.

Well you could make that argument for anything financed by the US EX-IM Bank (or it's EU equivalent), much less Boeing Capital and it's Airbus equivalent.

Its quite clear that AI wants the planes, so if this is what it takes to get it into their hands, so be it.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: goacom
Posted 2012-10-05 07:21:01 and read 4484 times.

The amazing display of Indian government bureaucracy, which AI is a part of continues.... It is only a matter of time before AI becomes irrelevant in the Indian market.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: comorin
Posted 2012-10-05 07:26:07 and read 4530 times.

Quoting goacom (Reply 24):
It is only a matter of time before AI becomes irrelevant in the Indian market.

I am afraid Adam Singh's invisible hand does not quite work in Indian markets...The only invisible hand seems to be the one in your pocket!

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: golfradio
Posted 2012-10-05 07:38:42 and read 4464 times.

Quoting Revelation (Reply 22):
I imagine that Boeing is trying to give the aura of confidence by putting its own money on the line, but instead it may be viewed as desperation - Boeing lending money that gets paid to Boeing, just to move its own merchandise.

It's not unlike auto manufacturers financing car purchases. I am sure the financing is insured. Plus don't forget the billions of dollars Boeing is making in military sales. The latest deal was in August for $1.4 billion for 22 Apache attack helis. A few 10 of millions in maybe added insurance premium is nothing compared to what Boeing is getting back in military sales.

Apache Deal for $1.4 billion

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: lightsaber
Posted 2012-10-05 08:32:31 and read 4199 times.

Quoting Pellegrine (Reply 20):
If you were a commercial bank or lessor...would you???!!!

NO.

I would not consider the payments nor interest rate dependable. I'm not surprised at the standoff what so ever.

Quoting blueflyer (Reply 21):
one option is to try and reposes the planes while outside of India
Quoting Darksnowynight (Reply 15):
aircraft repossession is not that dramatic.

It isn't the physical process I'm concerned about, but rather the political side show. The GoI needs to learn to play by contract law. The actual repossession is, as noted, not that tough. It is the business/political costs. Best to not enter the contract under the current terms. One should not have to confront a government to take back the collateral per contract.

Quoting Revelation (Reply 22):
I imagine that Boeing is trying to give the aura of confidence by putting its own money on the line, but instead it may be viewed as desperation - Boeing lending money that gets paid to Boeing, just to move its own merchandise.

Boeing is trying to make the best of a really bad situation. Having a half billion dollars of product lying about costs them. However, Boeing is not in a cash flow position to finance all of the AI 787s and their other obligations. So some other solution must be found. Boeing only recently brought up their bond rating to the point where they are competitive in aircraft leasing again. But that is a portfolio that needs to be spread among many aircraft types and a large number of customers.

Quoting Revelation (Reply 22):
No worries, there are enough people in the loop who accept bribes.

That has proven dependable...

Quoting golfradio (Reply 26):
Apache Deal for $1.4 billion

That justifies risking the financing on up to six 787s. What does AI do after that? Not to mention the Apache deal had its own profit targets...

Lightsaber

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: bikerthai
Posted 2012-10-05 08:57:36 and read 4106 times.

Quoting golfradio (Reply 26):
. Plus don't forget the billions of dollars Boeing is making in military sales.

Ding Ding Ding . . . Boeing have stressed the One Boeing concept, specially with India. So financing for one 787 (or even a small fleet of them) is now part of doing business. The Apache is only one item. The P-8I and C-17 already sold, the CH-47 coming up . . . potential for P-8 or MMA light follow on . . .

Both from a selling planes and buying sub-components stand point Boeing is learning to work in India and develop a positive relationship, bureaucracy and all . . . In some part of the world, these types of relationships can be better than gold . . .

bt

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: HAWK21M
Posted 2012-10-06 12:16:43 and read 3673 times.

Quoting bikerthai (Reply 28):
Both from a selling planes and buying sub-components stand point Boeing is learning to work in India and develop a positive relationship, bureaucracy and all . . . In some part of the world, these types of relationships can be better than gold . . .

Its all about $$$.....  

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: sweair
Posted 2012-10-07 02:43:20 and read 3457 times.

India will be a lot more stable when they get the tax system working, with its huge population many don't pay a dime in taxes today, people who could afford to pay taxes. But as I read an effort to register its population is ongoing.

The day they get a tax system working, I think India will take off as a rocket.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: aeroblogger
Posted 2012-10-07 04:44:00 and read 3358 times.

Quoting sweair (Reply 30):
India will be a lot more stable when they get the tax system working, with its huge population many don't pay a dime in taxes today, people who could afford to pay taxes. But as I read an effort to register its population is ongoing.

The day they get a tax system working, I think India will take off as a rocket.

The issue isn't taxation/revenue - everyone is overtaxed. Nobody can escape the ridiculous sales taxes on necessities like grocery and fuel...

The issue is corruption.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: bikerthai
Posted 2012-10-07 07:55:02 and read 3279 times.

Quoting HAWK21M (Reply 29):

Its all about $$$.....

Yes. If you can have good long term relationship, you can make more $$$ in the long rung. AKA Boeing-Japan relationship.

bt

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: Revelation
Posted 2012-10-07 09:03:43 and read 3204 times.

Quoting Stitch (Reply 23):
Its quite clear that AI wants the planes, so if this is what it takes to get it into their hands, so be it.

It's easy for AI to want the planes, what's harder is to actually pay back the $100M along with all the other debt it's carrying.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: Stitch
Posted 2012-10-07 09:20:45 and read 3185 times.

Quoting Revelation (Reply 33):
It's easy for AI to want the planes, what's harder is to actually pay back the $100M along with all the other debt it's carrying.

Air India is a Ward of the State, effectively, so the Government of India can always just pick up the check in the end if they must.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: aeroblogger
Posted 2012-10-07 10:45:22 and read 3110 times.

Quoting Revelation (Reply 33):
It's easy for AI to want the planes, what's harder is to actually pay back the $100M along with all the other debt it's carrying.

The government of India can afford $100M.

And since all AI financial transactions are processed through GoI, lenders have very little exposure to the airline itself.

However, the downside is that AI has to deal with the antics of Ministry of Finance.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: HAWK21M
Posted 2012-10-08 04:56:20 and read 2880 times.

Paying back $$$ is not an issue for AI.....As the GOI will eventually do that.....The problem is when will AI start to earn money  

They have everything needed to be sucessfull.

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: lightsaber
Posted 2012-10-08 07:41:40 and read 2789 times.

Serious question, has AI secured financing for the next airframes. I'm not talking in principal, but rather on an extended dependable basis. Boeing needed to save the morale of a manufacturing site; so I think this loan is a one off.

Will the next 787 delivery go off on schedule, or does AI return to being "The airline that shall not be named?"

Quoting HAWK21M (Reply 36):
Paying back $$$ is not an issue for AI.....As the GOI will eventually do that

When? On what timeline? I do not think payback is that assured.

Quoting aeroblogger (Reply 35):
The government of India can afford $100M.

Then why the drama?


Lightsaber

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: blueflyer
Posted 2012-10-08 17:40:37 and read 2644 times.

I did see a shiny new Air India 787 outside the paint shop at FTW today. Better turn over every cushion and put the money in the bags fast...

Topic: RE: AI Gets Boeing Loan For (1) 787
Username: aeroblogger
Posted 2012-10-08 17:50:09 and read 2625 times.

Quoting blueflyer (Reply 38):
I did see a shiny new Air India 787 outside the paint shop at FTW today.

VT-ANJ. Expected to be delivered in 2 to 3 weeks.

Hopefully, the Ministry of Finance will have figured out its issues by then.


The messages in this discussion express the views of the author of the message, not necessarily the views of Airliners.net or any entity associated with Airliners.net.

Copyright © Lundgren Aerospace. All rights reserved.
http://www.airliners.net/