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Axis Bank has become the first Indian bank to facilitate an aircraft financing transaction at Gujarat's Gift City IFSC. The deal, structured for AI Fleet Services Ltd, funds the purchase of 34 training aircraft for Air India's upcoming pilot training institute in Amravati, Maharashtra. This move aligns with India's push to establish Gift City as a global aviation leasing hub, reducing reliance on foreign lessors. Air India, currently undergoing a five-year transformation under Vihaan.AI, has placed a record-breaking order for 570 aircraft, with Gift City expected to play a key role in financing these acquisitions. Axis Bank's involvement signals a growing role for Indian banks in aviation finance.
Axis Bank has become the first Indian bank to execute an aircraft financing transaction through its International Banking Unit at Gujarat's Gift City IFSC. The deal was completed for AI Fleet Services Ltd (AIFS), the leasing subsidiary of Air India, involving a long-term loan for the purchase of 34 training aircraft. These aircraft will be deployed at Air India's upcoming pilot training institute in Amravati, Maharashtra. Advertisement
The order consists of 31 single-engine aircraft from US-based Piper and three twin-engine aircraft from Austria's Diamond Aircraft.
The Indian government has been actively promoting aircraft and ship leasing and financing operations at Gift City by offering tax incentives and regulatory relaxations. This initiative aims to establish Gift City as a competitive alternative to global financial hubs like Singapore and Dubai, reducing India's reliance on foreign aircraft lessors. Currently, over 80% of Indian airlines' fleets are leased from international lessors, making domestic financing a crucial step toward self-reliance in aviation.
Gift City was developed as India's first International Financial Services Centre (IFSC) to boost financial activities within the country. In 2021, the government introduced significant tax benefits and streamlined regulations to attract aircraft leasing firms, positioning it as a key player in aviation financing.
Air India's Chief Financial Officer, Sanjay Sharma, highlighted that the airline is undergoing a five-year transformation under the Vihaan.AI initiative. Launched in 2022 after the Tata Group took over Air India, this strategy focuses on fleet expansion, service enhancements, and financial restructuring.
As part of this plan, Air India placed a historic order for 470 aircraft from Airbus and Boeing in early 2023 one of the largest commercial aircraft deals globally. With additional aircraft orders, the total now stands at 570 planes, reinforcing Air India's aggressive expansion strategy. Sharma also noted that Gift City will play a crucial role in financing these acquisitions.
In the current financial year, AI Fleet Services Ltd has already completed eight finance lease transactions worth over USD 1 billion, underscoring its growing role in aviation leasing.
Axis Bank's involvement in this transaction also marks an important milestone for Indian banks in the aircraft financing space. While the bank has previously been engaged in lending for airline purchases, most transactions were traditionally routed through foreign lessors. By executing this deal at Gift City, Axis Bank is setting a precedent for more Indian financial institutions to enter the aviation leasing sector.
Axis Bank's pioneering role in aircraft financing at Gift City marks a major step in India's efforts to strengthen domestic aviation leasing and financing. With the government actively promoting Gift City through tax incentives, this transaction could pave the way for more such deals, positioning India as a competitive alternative to global leasing hubs. As Air India continues its ambitious Vihaan.AI transformation and fleet expansion, the significance of local financing avenues will only grow. This development not only benefits the airline industry but also enhances India's financial sector by integrating high-value transactions within the country.
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