SpiceJet takes to sale and leaseback policy

New Delhi: Low-fare airline SpiceJet Ltd, with some 100 daily flights, plans to sell and lease back all aircraft scheduled to be delivered to the carrier until 2010, in an attempt to offset rising operational costs at the two-year-old airline. SpiceJet has a fleet of 18 Boeing Co. aircraft and expects to add 13 aircraft by 2011, some of which may also be used to start the airline’s international operations to West Asia and South-East Asia, subject to government approvals.
A sale and leaseback agreement typically allows start-up airlines to generate additional capital and is often a stopgap arrangement to project a healthier balance sheet. Under this, SpiceJet gives up ownership of the planes and instead pays a leasing fee, in this case about $400,000 (Rs1.57 crore) a month for a Boeing 737-800 to the company that buys the planes. In the fiscal quarter ended September, for example, SpiceJet earned a profit of Rs20.4 crore from sale of three Boeing 737-800 to leasing companies despite operating losses.
The most recent addition to SpiceJet’s fleet, the Boeing 737-900 ER, fetched the airline about $2 million, according to another senior official who did not wish to be named.
14/11/07 Tarun Shukla/Livemint

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Categories: SpiceJet Nov 2007