Air India, India’s national carrier, has received a ₹14,000 crore ($1.7 billion) loan from the State Bank of India (SBI) and Bank of Baroda. (BOB). The loan was obtained to pay off the carrier’s existing debts as well as to fund ongoing capital expenditures such as the purchase of new aircraft and engine overhauls. According to reports, the loan was obtained at a 9.5% interest rate and is backed by a sovereign guarantee from the Government of India. The loan has a 10-year term with a four-year principal repayment moratorium.
Air India has struggled with a significant debt burden for many years, hampered its growth and profitability. The COVID-19 pandemic has exacerbated the situation, as travel restrictions and decreased demand for air travel have severely hampered the airline’s operations. In this context, the loan from SBI and BOB is a massive relief for the carrier, as it will relieve financial pressures and provide much-needed liquidity to support operations. The loan will also assist Air India in meeting its immediate obligations, such as salary payments and vendor and supplier dues.
The loan is part of the government’s plan to privatize and financially self-sufficiency Air India. The most recent attempt to privatize the airline was launched in January 2020, but the COVID-19 pandemic halted the process. Air India’s financial health is expected to improve as a result of the loan from SBI and BOB, making it more appealing to potential buyers.
In short, the loan of ₹14,000 crores from SBI and BOB is a significant development for Air India, as it will assist the carrier in managing its debt burden, supporting operations, and becoming financially self-sustaining. The loan could also help to facilitate the privatization of Air India, which has long been a government goal. However, the success of the privatization process will be determined by a variety of factors, including market conditions, the airline’s valuation, and the willingness of potential buyers to invest in the carrier.
