Aviation and airlines(Commonwelth unioun)_Both airlines are poised to welcome a substantial number of aircraft in the upcoming years. While competing vigorously for market supremacy and passenger loyalty in India, both IndiGo and Air India are broadening their horizons by venturing into the leasing sector within the nation. Air India took the initial step by establishing a leasing unit in the Indian state of Gujarat last month, and now it appears that IndiGo has followed suit.
Air India’s Leasing Endeavor:
In August, reports surfaced regarding Air India’s establishment of a leasing unit within the IFSC Gift City in Gujarat. The airline, with strong support from the Tata Group, has a considerable fleet expansion on the horizon.
It’s worth noting that the first six of the numerous Airbus A350s ordered by Air India are expected to be acquired through its leasing subsidiary, AI Fleet Services IFSC Limited, via a financial lease arrangement. This subsidiary operates under the wing of Air India and counts prominent figures such as Vinod Hejmadi (CFO of Air India), Kalpana Rao (Company Secretary of Air India), and Abhijit Menon among its top management.
AI Fleet Services IFSC Limited is anticipated to function exclusively for Air India and its affiliated entities in the leasing domain. While it is set to finance the forthcoming delivery of six A350s, the financing approach for the vast order of 470 aircraft remains uncertain.
IndiGo’s Diversification Strategy:
India’s largest airline, IndiGo, is also actively contributing to the development of an aviation asset financing ecosystem in India. It is doing so by establishing its leasing unit within IFSC Gift City, designated as a special economic zone.
The establishment of this unit is contingent on obtaining the requisite approvals. IndiGo has articulated its intention to issue corporate guarantees valued at up to $996 million, or its equivalent in Indian rupees or any other currency. These guarantees will serve as security for the payment obligations of its wholly-owned subsidiaries.
IndiGo is poised to invest approximately $3.6 million in one or more installments to facilitate this endeavor. Gaurav Negi, Chief Financial Officer of IndiGo, emphasized the significant growth of India’s aviation sector and the necessity of cultivating a comprehensive ecosystem around it. Financing aviation assets, such as aircraft and engines, is an integral facet of this development. Despite the predominant practice being centered in Dublin, the Indian government has been actively striving to establish a financial leasing hub in GIFT City.
The Significance of these Developments:
These developments transpire at a juncture when both IndiGo and airlines within the Tata Group collectively exert a prominent influence in the Indian aviation landscape. Their combined market share approached the 90% mark in July, attesting to their commanding position.
Both Air India and IndiGo have made monumental aircraft orders this year, signifying their ambitious aspirations for the years ahead. Air India’s order book boasts a total of 470 aircraft from both Airbus and Boeing, while IndiGo anticipates the receipt of nearly 1,000 aircraft from Airbus’ A320neo family over the ensuing decade.
In summation, IndiGo and Air India are strategically expanding their business portfolios by venturing into the aviation leasing sector, in alignment with the burgeoning aviation industry in India and their extensive expansion goals.
