The decision by the G8 nations to impose economic sanctions after India's detonation of nuclear devices, and the downgrading of its sovereign debt by a credit rating agency, have cast clouds over the fleet expansion plans of several Indian carriers. As part of the sanctions, the US has directed its Export-Import Bank not to finance Indian projects, including new aircraft. Meanwhile, Moody's has placed India below investment grade, making overseas credit costlier.
Airlines concede that, with sanctions in place, raising debt from international markets is now difficult and costly. 'Even a 1 per cent increase in interest costs can be killing,' says an airline spokesperson. Fleet expansion projects worth over US$4 billion by Air-India, Indian Airlines, Alliance Air and private airlines are expected to be affected. Almost all aircraft purchases in India are financed by the US Exim Bank.
Air-India plans to purchase 23 long range aircraft worth over $2 billion. 'The loss-making Air-India will have to defer its fleet expansion plans until the sanctions are lifted,' says a civil aviation ministry official.
Indian Airlines' board was scheduled to discuss its $1.5 billion fleet expansion plan in mid-July. The airline wants to replace its 12 Airbus 320s and 20 Boeing 737s.
Still, Boeing's India president Dinesh Keskar, insists that 'aircraft sales to India will not be affected in the wake of sanctions imposed by the US'.
Jet Airways also declares that the sanctions will not affect its fleet expansion plans. Exim is providing 85 per cent of the finance for the airline's $325 million acquisition of 10 B737-400s and B737-800s. Keskar says Boeing will deliver the aircraft to Jet Airways as planned.
Source: Airline Business
