Axis Bank, a leading private sector bank in India, has achieved a significant milestone by becoming the first Indian bank to carry out an aircraft financing transaction through its International Banking Unit (IBU) at GIFT City IFSC. This transaction was executed for AI Fleet Services Ltd (AIFS), the leasing division and wholly owned subsidiary of Air India, which is part of the Tata Group. This development represents a pivotal moment in India’s aviation finance landscape, which has been predominantly influenced by international banks, and underscores GIFT City’s emerging status as a center for aircraft leasing and financing.
The agreement entails a long-term USD loan designated for the acquisition of 34 training aircraft, intended for use at Air India’s forthcoming pilot training institute in Amravati, Maharashtra. This facility is poised to become one of the largest pilot training centers in India, thereby enhancing the nation’s aviation infrastructure.
Pic Courtesy-Social Media
Sanjay Sharma, Chief Financial Officer of Air India, stated, “Air India is on a transformative journey called Vihaan.AI, which includes an order for 570 aircraft, and GIFT City will play a crucial role in financing these acquisitions. In FY 2023-24, our leasing arm, AI Fleet Services Ltd (AIFS), successfully executed eight finance lease transactions exceeding USD 1 billion, with the recent deal for 34 training aircraft being one of the first instances of an Indian bank participating in long-term, US dollar aircraft financing. We are pleased to witness GIFT City evolving and becoming a viable option for aircraft leasing and financing as Indian aviation progresses.”
The aviation sector in India is anticipated to require around USD 30 billion in funding over the next ten years to support fleet modernization and expansion efforts. Traditionally, Indian airlines have depended on multinational banks for aircraft financing due to the absence of a robust domestic financing framework. The involvement of Axis Bank in this sector opens up new avenues for Indian aviation.
GIFT City is positioning itself as India’s premier hub for aircraft financing. In a historic first for Indian banking, all principal participants in the transaction—Lender, Borrower, Law Firm, Facility Agent, and Security Agent—are entities based in GIFT City. The Government of India is actively endorsing GIFT City as a strategic alternative to established global aviation finance centers, with Axis Bank’s leadership in this domain marking a significant advancement toward achieving that goal.
Key Highlights of the Transaction:
– First Indian Bank to Finance an Aircraft Deal – A landmark achievement in domestic aviation finance.
– Enhancing India’s Aviation Financing Capabilities – Creating opportunities for more Indian banks to assist in fleet expansion.
– Supporting Pilot Training Infrastructure – Financing 34 training aircraft to boost India’s pilot training capacity.
– Offering Indian Airlines Domestic Financing Solutions.
– Strengthening GIFT City’s Role – A pivotal step in establishing India as a global center for aviation finance and leasing.
– ‘One Axis’ Approach in Aviation Finance – Axis Trustee served as both Facility Agent and Security Trustee, providing a cohesive financial solution from the Axis group.
Hasmukh Adhia, Chairperson of GIFT, stated that GIFT City exemplifies India’s aspiration to become a prominent global financial center, showcasing a model of sustainable urban development alongside economic growth.