According to reports in the media, Indian national carrier, Air India, has secured a loan of 1.7 billion from two Indian banks, the State Bank of India (SBI) and Bank of Baroda (BoB). The funds will be used to meet the airline’s working capital requirements. While neither the airline nor the banks have made any official statements, a report by Mint cites sources in the know of the loan deal. The loan will help the airline to drive its aggressive growth plan. Given that the airline has been busy refurbishing aircraft in its fleets, buying and leasing aircraft, paying hikes to pilots, and meeting several other growth plans, the loan comes as a welcome development to the airline.
Covid-19 Woes
This loan comes as a relief for Air India, which has been hit hard by the COVID-19 pandemic. Air India had previously been seeking a government bailout package of INR 10,000 crore ($2 billion) to help it stay afloat during the pandemic.
The airline has been struggling financially for several years and has been operating with a debt that stood at over INR 61,562 crore (about $8 billion) on August 31, 2021. The COVID-19 pandemic exacerbated the airline’s financial woes, with the Indian aviation industry facing a severe downturn in 2020 as a result of the Covid-19 fallout.
The bright side for Air India
Air India has secured a loan of $1.7 billion from the State Bank of India (SBI) and Bank of Baroda (BoB). However, there has yet to be a breakdown of how the airline got from each bank. While there is yet to be an official statement backing the report, the loan deal does not come as a surprise, as it was reported last month that Air India was planning to take a loan from the banks mentioned in the report at an interest rate of 4.25% last year.
The loan from the banks will provide some much-needed relief for Air India as it expands its fleets and ramp up operation. However, the airline will need to continue to find ways to reduce its debt and improve its financial performance if it wants to survive in the long term.
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