Indian Airlines Cutting Finance Deals

From India, where they're still celebrating last night's big Oscar wins for "Slumdog Millionaire," come two pieces of news that illustrate the state of the global market for jet airliners. (Spoiler alert: The news isn't nearly as uplifting as the movie.)

First, government-owned Air India has announced that it's seeking about a billion dollars in financing that will allow it to take delivery on seven Boeing 777s this year.

This will be an interesting one to watch. As we discussed last week, the International Air Transport Association is forecasting that airlines will have tremendous difficulty this year getting the loans they'll need to close on their outstanding new jet orders -- so much so, in fact, that IATA thinks about half the planes scheduled for delivery this year could get pushed back into 2009 or later.

State-owned Air India does have an advantage over many carriers, in that the Indian government (not to mention the U.S. Export/Import Bank) is agreeing to guarantee the loans; that fact should allow it to get financing of some sort in this very difficult credit market. But the Indian government will also have to report to its taxpayers on the terms of the deal, and that should give us insight into the typically opaque world of jet financing, giving us a sense just how bad it really is out there.

Meanwhile, in Mumbai, one of India's relatively new private-sector carriers, Jet Airways, announced that it has completed a deal to lease four of its Boeing-built 777-300ERs to Gulf Air of Bahrain. Jet's been cutting back on its route structure in the wake of falling traffic, and decided it didn't need the 300-seat, long-haul jets. It's done short-term leases with Gulf before, so this deal was a natural.

The lease deal is great for the airlines -- Jet gets some revenue out of an otherwise unusable asset, while Gulf gets to expand its fleet quickly and (we'll assume) affordably. But it's tough news for Boeing, in that it takes out of the market a potential buyer for four widebody jets (worth about $1.1 billion at list prices, or maybe $800 million or so after discuounts).

We're likely to see more of these airline-to-airline deals in the coming months, and each one will represent lost new jet sales for Boeing and Airbus.