GURUGRAM- The largest domestic carrier, IndiGo Airlines (6E), is looking to damp lease five of the Qatar Airways (QR) owned Boeing 737 MAX 8 aircraft to support its growing operations and mitigate the grounding of its A320s due to Pratt and Whitney engine issues.
Insiders familiar with the situation have revealed to ET that the airline intends to lease the aircraft from Qatar Airways for a duration of six months, particularly during the bustling summer travel season. These planes, which are currently in operation by the carrier based in Doha, are around three years old.
IndiGo to Lease 737 MAX
A damp lease, characterized by the lessor supplying the aircraft, cockpit crew, and maintenance to the airline, proves to be a more expensive arrangement compared to a standard lease.
Qatar Airways will handle maintenance of the aircraft, while IndiGo will provide the cabin crew. This marks IndiGo’s inaugural venture into operating Boeing 737 planes, having been an operator of Airbus A320 aircraft.
IndiGo’s unconventional decision stems from the challenge of securing enough used aircraft for short-term leases, as the availability of planes in the leasing market has significantly diminished.
The airline has been compelled to ground approximately 75 Airbus A320 Neo aircraft until December due to a recall by US-based aerospace major RTX. The recall involves inspecting 1,000 P&W engines after the discovery that powder metal contamination could potentially result in the cracking of certain engine components.
Huge Impact on Indian Carrier
IndiGo, boasting a fleet of 135 planes, possesses the largest potentially impacted fleet. The airline has disclosed that the capacity growth during the current January-March period will experience a 12% reduction compared to the average 15-19% growth witnessed in previous quarters.
In the preceding year, the airline engaged in wet leasing 11 Airbus A320Ceo (the older version of the aircraft) and was in negotiations for an additional 10 on a dry lease. However, this endeavor did not materialize, given the substantial increase in leasing prices resulting from a scarcity of available used planes.
The scarcity of used planes has become more pronounced as airlines worldwide retain aircraft they had intended to retire. This retention is due to a shortage in capacity arising from supply chain constraints and ongoing issues with engines.
Shortage of Used Planes
“A person involved in the process stated, ‘No lessor is willing to provide planes on a dry lease for a short six-month period. Obtaining well-maintained older aircraft has become challenging due to supply chain issues. Consequently, various options are being explored. IndiGo is cautious about entering a scenario where a leased plane might encounter issues.’
Recent restrictions on expanding the production of Boeing 737 MAX aircraft following the Alaska Airlines (AS) incident will further constrict the supply situation.
Analysts at Ishka, specializing in aircraft valuation, noted in December that only 26 Airbus A320 Ceo aircraft were available for rental, with the market value of a 5-year-old A320Ceo rising by 22% compared to January 2022.”
IndiGo, formerly accustomed to returning aircraft after six years, is now compelled to retain them for an extended duration to address the supply gap.
Sidhharth Nakhende, Head of Airline Analysis at Ishka, mentioned that although IndiGo has effectively navigated the challenges stemming from the global grounding of aircraft due to P&W engines, the associated costs will be substantial owing to heightened demand for alternative aircraft.
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