Air India will get a sovereign guarantee from the Government in the next few days for the $300 million funds it plans to raise through External Commercial Borrowing route, according to a senior government official.
While government guarantee for Air India loans is not new, this would be the first time Air India would be raising funds through the ECB route.
The funds, which would give Air India about Rs.1,800 crore would be utilised by the state owned carrier for carrying out maintenance work on its aircraft and ensure that more aircraft can be used in its fleet to operate flights and also for working capital needs, said a official from Ministry of Civil Aviation.
Air India currently has a fleet of 62 narrow body aircraft from the Airbus A-320 family, but only 59 are operational due to lack of spares, according to the official.
The airline is also working with Airbus to extend life of 17 narrow body planes, which have hit an average age of 17.5 years.
The Union budget in 2012-13 allowed airlines to raise funds from international markets to make it easier for domestic firms to operate in the Indian market.
The proposal which was valid till March 2013 was subsequently extended till March 2016.
Under the plan, the ECB ceiling for the entire civil aviation sector would be $1 billion and the maximum permissible ECB that can be utilised by an individual airline company will be $300 million.
Two private sector airlines Jet Airways and GoAir have used the facility, raising a total of $350 million, with Jet Airways accounting for majority of it, according to the official.
With Air India fund raise, the total under ECB route under the window goes to $650 million. Air India has a debt burden of around Rs.40,000 crore.