Why aircraft lessors’ woes may lead to costlier flights

NEW DELHI: Record high airfares hurting passengers could rise even further following yet another instance of foreign lessors facing roadblocks in repossessing their aircraft from a troubled Indian carrier.
Leasing aircraft could cost 2025% more for startups and financially weak Indian carriers after the Go First case where lessors are now barred from taking their planes back for at least six months, unless the NCLAT gives them some relief, people in the know said. Only IndiGo and Tata Group carriers led by Air India could be spared this increased cost as they are “good credit for lessors”.
“Lease rentals account for 10­12% of an airline’s operating cost. A 20­25% increase in lease rentals will mean overall cost rising by 2­3%, which will have to reflect in ticket prices. Except AI and IndiGo, it will be very challenging for other airlines, including startups. NCLT has directed Go First’s erstwhile board to deposit Rs 5 crore with the resolution professional while the 55 aircraft currently with the airline are worth over $2.5 billion,” said an industry veteran.
“Now at the first sign of trouble in an Indian carrier, lessors will line up to repossess planes to avoid such a scenario where an airline uses the IBC route to escape deregistration of aircraft,” said another official. In the past also, lessors faced trouble in getting planes back from airlines — such as Jet and Kingfisher — that went bust, with aircraft stuck with the latter being sold as scrap after rotting away at Indian airports. Meanwhile, Go’s new management will have to satisfy DGCA that it has the resources to safely operate flights in terms of money, manpower and machines.