Air India plans to lease out aircraft may not take off

Mumbai: Cash-strapped Air India wants to dry lease some of its aircraft as part of its effort to rationalise its fleet and make money. Not too many people are sure, though, if the timing is right.
With the aircraft ‘leasing-out environment’ still not looking up, the valuations that Air India may get in this scenario could be much lower, say experts. Normally, the lease rates are about 0.8 to one per cent of the aircraft value, with a two-three month lease rental as security deposit. But the actual price is negotiated on each deal subject to various conditions.
“A Boeing 777-200 may fetch Air India between $1.9 million and $2.5 million a month (about Rs 10-12 crore),” Mr Arun Narayan, Research Analyst – Aerospace & Defence Practice, Frost & Sullivan - South Asia and Middle East, told Business Line in an e-mail response.
However, it’s “less of a lessor’s market and more of a lessee’s market. So the actual price is likely to be on the lower end of the band,” he said, adding that a Airbus 310 Freighter would fetch the airline much lower, “may be $0.5-1 million a month (about Rs 2-Rs 5 crore).”
Earlier this month, the national carrier had put out expressions of interest for dry leasing seven aircraft of which three were Boeing 777-200 LR (manufactured in 2007) and the balance Airbus 310-304 freighters (made in 1990).
According to analysts, apart from the fact that market conditions are not ideal, airlines have lower negotiating power as they are not professional leasing companies such as GECAS or ILFC.
When the global economic recession hit air traffic growth, airlines globally embarked upon reducing capacity. However, India was slow to react and is still reeling under the effects of overcapacity. According to industry estimates, there is still 20-25 per cent overcapacity in the Indian skies.
13/10/09 Shubhra Tandon/Business Line

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Categories: NACIL Oct 2009