IndiGo Is Not In a Financial Position To Complete Lease Payments

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India’s largest airline, IndiGo recently said that it is not in a position to pay out its dues of lease rentals. The airline said that it needs to defer its lease payments by six months because of the tough cash flow position. Commercial flights have been stopped since March 24, 2020, and IndiGo is the only airline which has sustainable cash reserve to meet most of its costs for the next six months. However, the lease rental payments for IndiGo would become too much of a burden in times like this. That is why the airline is currently working with the lessors for deferring the payments for six months.

indigo-deferring-on-lease-rental-payments
Picture Credits - Money Control

IndiGo’s Sale-and-Leaseback Mode

IndiGo currently has a fleet of 259 aircraft. This fleet comprises of A320s, A321s, A320neos, and ATRs. The airline works in a sale-and-leaseback mode. What happens in such an arrangement is that first the aircraft is sold to a party and then taken back on lease by an airline. This kind of deal helps in reducing the overall maintenance costs for the airline. The net cost that indiGo had to pay for three months of engine rental payments during the 2019 quarter was Rs 134.30 crore.

IndiGo Keenly Waiting To Resume Services

The airline, like every other in India, is waiting for the lockdown to lift. Centre for Asia Pacific Aviation (CAPA) has calculated that the India aviation is going to face a loss of around $3.6 billion in the first quarter of this fiscal year. The lockdown which was supposed to be lifted on April 14 is now extended until May 3. IndiGo has made a blueprint of the plans they are going to execute once the airline comes back in operation. Every employee of the airline has been trained with the help of video courses to ensure there is no delay in work when services resume.

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Tanay hails from Bilaspur, Chattisgarh and is a sports and fitness enthusiast. Reading and writing is something which comes to him out of love for the web of magic that words can create.

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