Tuesday, October 23, 2018

IndiGo drops plan to buy planes, sticks to sale and leaseback model

New Delhi: India’s largest airline IndiGo has dropped the plan to outright purchase aircraft, and will continue with the sale-and-leaseback model, in a bid to conserve cash for the near future.

This is part of the plan to negotiate the volatile environment for the industry, when airlines cannot spike ticket prices even as they face the twin challenges of costly fuel and fluctuating exchanging rates.

“This (model) makes more sense in the current business environment. When the cost environment improves, we will re-evaluate the strategy,” said a source.

Last year, changing its strategy, IndiGo had said it would own aircraft rather than use the sale-and-leaseback model. This could help reform the cost structure, as the airline would acquire and own for longer periods the fuel-saving new-generation A320neos.

However, the sale-and-leaseback model would help IndiGo boost income at a time when a fare war might hurt its numbers.
23/10/18 Arindam Majumder/Business Standard