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AI Gets Boeing Loan For (1) 787  
User currently offlinerotating14 From United States of America, joined Jan 2012, 650 posts, RR: 0
Posted (1 year 11 months 2 days 18 hours ago) and read 12726 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!

39 replies: All unread, showing first 25:
 
User currently offlinealoges From Germany, joined Jan 2006, 8706 posts, RR: 43
Reply 1, posted (1 year 11 months 2 days 18 hours ago) and read 12672 times:

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


Walk together, talk together all ye peoples of the earth. Then, and only then, shall ye have peace.
User currently offlineStitch From United States of America, joined Jul 2005, 30921 posts, RR: 87
Reply 2, posted (1 year 11 months 2 days 18 hours ago) and read 12656 times:
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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.

User currently offlinerotating14 From United States of America, joined Jan 2012, 650 posts, RR: 0
Reply 3, posted (1 year 11 months 2 days 17 hours ago) and read 12541 times:

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

User currently offlinelightsaber From United States of America, joined Jan 2005, 13030 posts, RR: 100
Reply 4, posted (1 year 11 months 2 days 17 hours ago) and read 12460 times:
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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



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineStitch From United States of America, joined Jul 2005, 30921 posts, RR: 87
Reply 5, posted (1 year 11 months 2 days 17 hours ago) and read 12316 times:
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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?


User currently offlinesomething From United Kingdom, joined May 2011, 1633 posts, RR: 21
Reply 6, posted (1 year 11 months 2 days 17 hours ago) and read 12278 times:

Maybe a friendly financing deal was part of the compensation?


..sick of it. -K. Pilkington.
User currently offlineStitch From United States of America, joined Jul 2005, 30921 posts, RR: 87
Reply 7, posted (1 year 11 months 2 days 16 hours ago) and read 12219 times:
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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)?


User currently offlinelightsaber From United States of America, joined Jan 2005, 13030 posts, RR: 100
Reply 8, posted (1 year 11 months 2 days 15 hours ago) and read 12057 times:
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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



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineStitch From United States of America, joined Jul 2005, 30921 posts, RR: 87
Reply 9, posted (1 year 11 months 2 days 15 hours ago) and read 12049 times:
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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.


User currently offlinelightsaber From United States of America, joined Jan 2005, 13030 posts, RR: 100
Reply 10, posted (1 year 11 months 2 days 15 hours ago) and read 11970 times:
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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



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlinerotating14 From United States of America, joined Jan 2012, 650 posts, RR: 0
Reply 11, posted (1 year 11 months 2 days 14 hours ago) and read 11842 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.


User currently offlinelightsaber From United States of America, joined Jan 2005, 13030 posts, RR: 100
Reply 12, posted (1 year 11 months 2 days 13 hours ago) and read 11628 times:
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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



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineaeroblogger From India, joined Dec 2011, 1363 posts, RR: 0
Reply 13, posted (1 year 11 months 2 days 11 hours ago) and read 10165 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.



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User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 80
Reply 14, posted (1 year 11 months 2 days 8 hours ago) and read 9263 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.


User currently offlineDarksnowynight From United States of America, joined Jan 2012, 1356 posts, RR: 3
Reply 15, posted (1 year 11 months 2 days 8 hours ago) and read 9150 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).



Posting without Knowledge is simply Tolerated Vandalism... We are the Vandals.
User currently offlineYULWinterSkies From United States of America, joined Jun 2005, 2178 posts, RR: 5
Reply 16, posted (1 year 11 months 2 days 8 hours ago) and read 9041 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?



When I doubt... go running!
User currently offlineaeroblogger From India, joined Dec 2011, 1363 posts, RR: 0
Reply 17, posted (1 year 11 months 2 days 7 hours ago) and read 8728 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.



Airports 2012: IXE HYD DEL BLR BOM CCU KNU KTM BKK SIN ICN LAX BUR SFO PHX IAH ORD EWR PHL PVD BOS FRA MUC IST
User currently offlinecomorin From United States of America, joined May 2005, 4896 posts, RR: 16
Reply 18, posted (1 year 11 months 2 days 7 hours ago) and read 8594 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....


User currently offlinelightsaber From United States of America, joined Jan 2005, 13030 posts, RR: 100
Reply 19, posted (1 year 11 months 2 days 5 hours ago) and read 7800 times:
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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



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlinePellegrine From United States of America, joined Mar 2007, 2438 posts, RR: 8
Reply 20, posted (1 year 11 months 2 days 4 hours ago) and read 7478 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.

  



oh boy!!!
User currently offlineblueflyer From United States of America, joined Jan 2006, 3972 posts, RR: 2
Reply 21, posted (1 year 11 months 2 days ago) and read 6254 times:
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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.



I've got $h*t to do
User currently offlineRevelation From United States of America, joined Feb 2005, 12468 posts, RR: 25
Reply 22, posted (1 year 11 months 1 day 22 hours ago) and read 5548 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.



Inspiration, move me brightly!
User currently offlineStitch From United States of America, joined Jul 2005, 30921 posts, RR: 87
Reply 23, posted (1 year 11 months 1 day 20 hours ago) and read 4760 times:
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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.


User currently offlinegoacom From United States of America, joined Feb 2009, 96 posts, RR: 0
Reply 24, posted (1 year 11 months 1 day 19 hours ago) and read 4464 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.

25 comorin : 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!
26 Post contains links golfradio : 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 m
27 lightsaber : NO. I would not consider the payments nor interest rate dependable. I'm not surprised at the standoff what so ever. It isn't the physical process I'm
28 bikerthai : 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 n
29 Post contains images HAWK21M : Its all about $$$.....
30 sweair : India will be a lot more stable when they get the tax system working, with its huge population many don't pay a dime in taxes today, people who could
31 aeroblogger : The issue isn't taxation/revenue - everyone is overtaxed. Nobody can escape the ridiculous sales taxes on necessities like grocery and fuel... The is
32 bikerthai : Yes. If you can have good long term relationship, you can make more $$$ in the long rung. AKA Boeing-Japan relationship. bt
33 Revelation : 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.
34 Stitch : 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.
35 aeroblogger : The government of India can afford $100M. And since all AI financial transactions are processed through GoI, lenders have very little exposure to the
36 Post contains images HAWK21M : 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
37 lightsaber : Serious question, has AI secured financing for the next airframes. I'm not talking in principal, but rather on an extended dependable basis. Boeing ne
38 blueflyer : 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...
39 aeroblogger : VT-ANJ. Expected to be delivered in 2 to 3 weeks. Hopefully, the Ministry of Finance will have figured out its issues by then.
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