IndiGo seeks deferring aircraft lease rental payments by six months, says source

Country's largest airline IndiGo is working with aircraft lessors for deferring lease rental payments by at least six months, a source said on Tuesday as suspension of flight services is adversely impacting its financial position.IndiGo has 259 planes in its fleet comprising A320s, A320Neos, A321s and ATRs.

Airlines are grappling with acute financial woes as commercial services remain suspended in the wake of the nationwide lockdown to curb spreading of coronavirus infections.Against this backdrop, the source said IndiGo is looking to defer payment of aircraft lease rentals to lessors.

The Gurugram-based carrier largely finances its aircraft through sale-and-lease back mode. Under this arrangement, an aircraft is sold and then taken back on lease by an airline. Generally, this arrangement helps in reducing maintenance costs related to an aircraft.

"IndiGo has been seeking to defer payment of aircraft lease rentals by at least six months. It is working towards this with its lessors," the source told PTI.When contacted, an airline spokesperson said, "we don't comment on speculation".

As per IndiGo's December quarter earnings presentation, the net outgo towards aircraft and engine rental payments during the three months at Rs 134.30 crore.

Lease rentals and maintenance expenses, among others, are part of an airline's fixed costs. These costs accumulate irrespective of whether flights are operating or not.At the end of December 2019, IndiGo had a total of 257 planes.

On March 26, aviation consultancy Centre for Asia Pacific Aviation (CAPA) estimated USD 3-3.6 billion losses for the Indian aviation industry in the first quarter of this fiscal. CAPA's report came a day after the nationwide lockdown was implemented. The lockdown, which was to initially end on April 14, has been extended till May 3.

Commercial flight services remain suspended since March 25 and only certain flight operations, including those for ferrying cargo, are allowed.