Friday, May 12, 2023

Why problems with aircraft lessors may result in more expensive flights

 NEW DELHI: After yet another instance of foreign lessors encountering obstacles in repossessing their aircraft from a troubled Indian carrier, record-high airfares hurting passengers may rise even more.

After the Go First case, lessors are now prohibited from taking their planes back for at least six months, unless the NCLAT provides them with some relief, according to people in the know. This means that leasing aircraft could cost startups and financially weak Indian carriers between 20 and 25 percent more. Just IndiGo and Goodbye Gathering transporters drove via Air India could be saved this inflated expense as they are "great credit for lessors".

"Lease rentals make up 10 to 12 percent of an airline's operating expenses." A 20­25% expansion in rent rentals will mean by and large expense ascending by 2­3%, which should reflect in ticket costs. It will be extremely difficult for other airlines, including startups, with the exception of AI and IndiGo. An industry veteran stated, "NCLT has directed Go First's former board to deposit Rs 5 crore with the resolution professional, despite the airline's 55 aircraft being worth over $2.5 billion."

"Presently at the earliest difficult situation in an Indian transporter, lessors will arrange to repossess planes to keep away from such a situation where a carrier utilizes the IBC course to get away from de­registration of airplane," said another authority. Also in the past, lessors had trouble getting planes back from airlines that went out of business, like Jet and Kingfisher. The planes that were stuck with Kingfisher were sold as scrap after rotting at Indian airports. In the meantime, Go's new management will need to demonstrate to DGCA that it possesses the financial, human, and mechanical resources necessary to safely operate flights.

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