Thursday, April 17, 2014

Air India Bridge Loan From Brooklyn.

The old sayings for having a weakness in your financial portfolio is "you're going to sell someone a bridge in Brooklyn, New York", or I had recently sold 20 acres of swamp land in LA as a measure of obtaining mad money". The problem with Air India is obtaining a "Bridge Loan" for Aircraft, specifically for the 787, within six months. They need $500  million (US) of mad money for a purchase of the next four 787. This is like going for  "Money Tree Loans", before the next paycheck. This covers/plugs a gap in the monthly financial flow, and allows making a timely purchase while not having to wait until its long term financials are set in place.

Why does Air India go there, because they need four more 787 revenue units that have a lower operational cost, which will infuse more money into Air India. The Bridge loan is a bridge cash account until Air India reconfigures its fleet. They are selling three 777's from its fleet. This alone demonstrates a concerted effort for maximizing the fleet. Perhaps those 777 can not be filled, and are flying too much passenger space around at a loss. The economics of the 787 will have fill-able seats quantity arriving at cheaper operating costs than the aging 777.

A bridge loan is a useful tool, but it shows a venerability of Air India's cash position. Demonstrating an inability from its operational efficiency where it has not achieved a plus position on cash flows. Four more 787s and three less 777 would start tipping the balance sheet. Air India is not there yet. The revenue inputs, and reduced operational expenses from the 787 shows Air India, that it needs all of its 27, 787's. This should right the Air India financial ship. If they can get them on the flight line fast enough. The baby steps are taken from Boeing's production schedule and its recieving blocks of money from the use of Bridge Loans.

When Air India goes into long term financing arrangements, they will have a per unit Revenue and cost center for each 787. They will demonstrate how a loan will make Air India profitable, and how it can easily pay for these aircraft from just flying them every day. Air India will demonstrate how it fills seats with these aircraft. It is the right size at the right time. Bankers will nod, look sternly, and stare at one another, and then will defer to its analytical team for a report creation of Air India's loan request. The Bridge Loan is like a credit card at higher interest rates for paying Boeing in behalf of Air India. The long term loan is a consolidation of potential debt under financial arrangements for these next four 787s.

As mentioned before these four aircraft will bring the 787 fleet closer to 20 of its type. A very significant portion of Air India revenue stream and expense reduction as a whole will help Air India over all. Each group of aircraft inducted is a change for the airline, as it opens up new opportunity where it needs to compete. The Boeing 787 is an "Affect" on Air India's financial position, business plan, and success. The company will simple change, because it will eventually have twenty-seven Boeing 787. It no longer will have reasons to fail, or lose money. It will compete with all its competitors until they too can have the 787-8 or 787-9 during the next ten years. Having the sharpest knife in the drawer does matter in this case. The sure weight of having one type of airplane as the core for your fleet makes the difference.