Aviation cos leave lease rental exposures unhedged

Bangalore: Aviation companies have left their lease rental exposures unhedged despite the sharp 30 per cent exchange rate depreciation since the beginning of this financial year.
Private sector aviation companies’ fleet comprise mostly leased aircraft. The lessors were entirely cross-border. The American International Group subsidiary company – International Lease Financing Corporation — and another Ireland based, AWAS (Ansett Worldwide Aviation Services) and GE Commercial Aviation Services, are among the largest lessors to the large domestic aviation companies – Jet Airways Ltd, Kingfisher Airlines and SpiceJet.
Lease rental costs have escalated between the first and the third quarter. Most of the lease rental arrangements were denominated in US dollar. Lease rental costs averaged only about 6 per cent in 2004 even after factoring hedging costs. Despite the fact that the six-month London Inter Bank Offered Rate (LIBOR) rules at 1.83 per cent, lease rental costs have risen on account of the rupee’s depreciation against the dollar. In April 2008, the rupee was Rs 39.98 to a dollar. Currently, the rate is Rs 51.70.
Yet, few airlines have taken forward cover against this escalation
14/03/09 Business Line

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Categories: Indian Aviation- In General Mar 2009