Mumbai: Air India Ltd, India’s oldest airline, will raise up to $100 million overseas as the debt-laden firm is exploring multiple ways to access cheaper finance to fuel expansion.

The funds will be used to make initial payments to buy six Dreamliner aircraft from Boeing Co., according to two Air India executives who spoke on condition of anonymity.

Air India has already taken delivery of 21 Boeing 787 Dreamliner planes, which are critical to the turnaround of the state-owned airline.

Last week, the Reserve Bank of India liberalized rules for firms to borrow overseas. The guidelines propose to allow more investors but spell out a minimum average maturity cap of three-five years for normal borrowings, and 10 years for long-term borrowings.

“Air India will shortly issue bids for ECBs (external commercial borrowings) to the extent of $80 to $100 million to make initial payments to the aircraft manufacturer," one of the executives said, adding, “The planes will be delivered to the fleet from 2016-17 onwards."

He said the overseas borrowing route will be cheaper for Air India to fund its expansion.

The airline has also approved the enhancement of the capital budget from ₹ 705 crore to ₹ 900 crore, the second executive said.

“This was mainly due to acquisition of one more CFM engine and one GE engine as spares to support its existing fleet of Airbus and Boeing aircraft," he said. “The additional funding will be raised by Air India from its internal resources and the proposed ECBs."

Ashwani Lohani, the airline’s new chairman and managing director, has taken a series of steps to turn Air India around, including financial re-engineering and operational measures, the second executive cited above said.

The national flag carrier is surviving on a ₹ 30,000 crore government bailout. The firm, with a total debt of ₹ 40,000 crore as on 31 March, is expected to turn around only by 2018-19.

On Thursday, Lohani said his proirity was to improve the on-time performance of Air India, increasing aircraft utilization and introducing new routes.

Lohani is hopeful of Air India’s future as “there is lot of positivity in the air". He said there is no interference from the government in running the airline.

He said Air India has integrated domestic and international flights to one terminal in Mumbai. On Thursday, it shifted its operations to Terminal 2 of Mumbai airport, from where the airline will fly a total of 63 flights—11 international and 52 domestic. “This will help in reducing connecting time for the passengers. This also gives us an opportunity to develop Mumbai as our secondary hub after Delhi," Lohani said.

However, experts remain unconvinced.

“Unless an airline starts making profits, it’s very difficult to survive for long," said K.G. Vishwanath, partner at Trinity Aviation Consultants Pte Ltd Singapore, a consultancy. “Air India might have been an exception, but I wonder for how long."

“Eventually, all initiatives should result in either revenue enhancement or cost reduction to become profit accretive. The ECB should result in lower cost of debt. On-time performance improvement should be able to improve brand image and therefore higher loads. But these need to be sustained long-term initiatives and become part of the airline’s DNA for them to be effective," Vishwanath added.

In June, the aviation ministry asked SBI Capital Markets Ltd to review the turnaround plan of the loss-making airline in the backdrop of changes in the operating environment and increased competition.

Air India is expected to post a loss of ₹ 3,900 crore for the year ended 31 March 2014, numbers for which are yet to be disclosed. It posted a loss of ₹ 5,100 crore in 2012-13 and a loss of ₹ 7,100 crore in the preceding fiscal.

Lohani said he is aware of the challenges. “Is there any challenge that is easy? I am focusing on my work at this point," he said.

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