Re fall negates drop in aircraft lease costs

Mumbai: Lease rentals for aircraft have seen a dip of late, what with airlines around the world trying to trim operations and demand for aircraft dipping. But the Indian airlines industry has nothing to cheer about — the depreciation of the rupee against the dollar is acting as a counterweight and has, in effect, pushed up the effective rates for Indian carriers.
The market rates for leasing a narrow-body aircraft such as the Boeing 737 have fallen from $380,000 at the peak of demand to about $320,000. Wide-body aircraft rates too have eased significantly, as business travel has been down due to increasing economic woes.
The rupee, which has lost almost 25% of its value over the recent past, has pushed up costs for India’s airlines, which have a large part of their payments denominated in dollar.
Hitesh Patel, executive vice president, Kingfisher Airlines, said, “While it is true that rentals have softened, we haven’t had too much benefit as the dollar has gone up. Also, we have been trying to cut excess capacity ourselves. Not renewing leases is a good way to reduce capacity.”
A senior Jet Airways executive, who did not want to be named, added, “Lease rentals have come down by 10-15% for most aircraft types compared with 6-8 months ago. But that hasn’t benefited us too much.” He said that Jet would not be renewing the leases of three of its Boeing 737-400 aircraft, which are to expire early next year.
26/11/08 Nirmal John/Daily News & Analysis

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Categories: Indian Aviation- In General Nov 2008