Indigo inducts fifth aircraft

Taking a cue from other Indian carriers, Delhi-based budget carrier IndiGo Airlines has done a sale and leaseback deal on all the five jets it has taken delivery so far. The airline plans to do similar deals involving operational or financial leases for the first 15 of the 100 Airbus A-320s it has booked, the airline’s CEO Bruce Ashby said. Ashby declined to give financial details. Sale and leaseback is a popular financing tool used by airlines under which the buyer sells back the aircraft to the seller and leases it back again, thus saving on large down payments and effectively owning the aircraft bought at a bargain price while paying something like a rent.

Leading carriers like Jet Airways, Air Deccan and Kingfisher Airlines have entered into sale and leaseback deals and also earned some cash in the process. Some Indian carriers had booked planes when the market was still soft while few others secured bargains because of large orders. IndiGo had surprised the world by ordering 100 A-320s. Air Deccan placed an order for 60 A-320s. Given the demand, the carriers are cashing in on financial innovation. For instance, an airline can buy an A-320 from Airbus for $43 million against a list-price of $50 million, and can lease it back at a value of $45 million, effectively giving it a profit of $2 million. Such deals are helping airlines manage their cash flows in a fiercely competitive market in which aggressive pricing can affect revenues while marketing costs are vital to build brands and market share.

visit us @ http://www.silkrouteholidays.com