The Hindu Business Line : Aircraft acquisition — Kingfisher Air gets European credit support

THE UB Group on Friday said its proposed low-cost airline, Kingfisher Air, has the backing of European export credit agencies (ECAs) to acquire Airbus aircraft.

The ECA-guaranteed aircraft finance transaction will help UB Holdings Ltd to raise funds at London Inter-Bank Offered Rates, a UB official told Business Line.

Kingfisher Air has signed a deal with Airbus to acquire 12 brand new A-320 aircraft, each of them costing around $58 million. The airline, which is expected to kick-start operations early next year, will initially acquire two or three A-320s and later take a decision on acquiring the rest.

Meanwhile, it has already signed a deal with GE Capital Aviation Services to take on lease four A-320s, worth Rs 100 crore. Kingfisher Air said earlier that it had negotiated competitive deals with Airbus to increase the value proposition.

The three European ECAs that support Airbus are COFACE of France, ECGD of the UK and Euler Hermes of Germany. ECAs are public agencies that provide government-backed loans, guarantees, credits and insurance to private corporations from their home country to do business abroad, particularly in the financially and politically risky developing world.

All aircraft in the Kingfisher fleet will seat 180 passengers in a one-class "funliner" configuration. The fares will be lower than economy-class travel on full service airlines but slightly more than the `bus service'-type low-cost competition.

The airline expects to have the lowest per seat mile cost in India by virtue of a combination of leased and purchased aircraft. It also plans to have maximum capacity utilisation, with the lowest turnaround times.

It proposes to maintain low operating overheads by maximising outsourcing of ground handling and plans to extensively use IT to lower costs and allow for constant dynamic models on pricing, aircraft utilisation and route planning.