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May 26, 2024
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Delhi-based low-cost airline IndiGo intends to wet lease extra aircraft to cover the shortfall for its scheduled international operations. The lease, which reportedly includes three Boeing 777s from Turkish Airlines, is “an interim measure”. A wet lease means that IndiGo will lease the aircraft with the crew as against a day lease in which IndiGo would have received just the aircraft and no crew to operate it. Turkish 777s set to cover capacity shortfall of IndiGo.

“We have received in-principle approval from the regulators for the same and the induction of these aircraft remains subject to further requisite regulatory approvals. We are committed to exploring every opportunity possible to overcome these capacity challenges and provide our customers with efficient and affordable air travel,” IndiGo said in a statement.

The statement points out that the decision to wet lease aircraft has been taken as the aviation industry globally continues to face significant supply chain disruptions adding that “we (IndiGo) have been exploring a multitude of solutions to enable us to continue our operations smoothly.”

The statement adds that international air travel is going through a strong period of recovery, and demand continues to rise in the upcoming festive and winter seasons. This is a positive sign for the industry and IndiGo remains very bullish on strong growth for international travel to and from India in the future. New CEO Pieter Elbers recently told AirInsight that he didn’t rule out wet leasing extra capacity.

While IndiGo has not disclosed the type of aircraft it is looking to lease, a leading economic Indian daily reported that it plans to wet lease three Boeing 777s from Turkish Airlines. The carrier has a fleet of 33 Triple Sevens, which are all active. So wet-leasing them to IndiGo would affect Turkish’s own capacity.

Widebodies make sense

Commenting on the development, an expat aviation executive who has worked with airlines in India said: “There have been rumors for some years that IndiGo would venture into widebodies and it makes sense given its incredible domestic success. These aircraft will likely initially be used on routes to Turkey. Further aircraft may follow and potentially their business model will change from  ‘LCC’ to ‘hybrid’”, the expat pointed out.

However, there are some like Nripendra Singh, Global Director, Aerospace and Defence, Frost and Sullivan who feel that even if IndiGo is to wet lease a widebody, it will not change its basic model and the airline will continue to offer a single class cabin option.

But be that as it may, Satyendra Pandey, Managing Partner, Aviation Advisory firm, AT-TV, who finds the IndiGo wet-lease announcement an interesting development in the Indian skies, says that IndiGo has been operating flights to Istanbul using the A321neo but passenger reaction has been mixed. “The route will see a high capacity 777 deployed which has 372 seats in economy and another 48 in business class which represents an 89 percent increase in total seats on a sector-wise basis,” Pandey says.

He points out that the Delhi-Istanbul flight continues to be the longest flight segment on IndiGo and the aircraft swap with a 777 should certainly bode well for the airline. “The deployment of the 777 will enable IndiGo to redeploy aircraft on other shorter routes thus partially alleviating the capacity woes,” he adds.

Feeding Turkish’ network

Pandey feels that by virtue of its market position and traffic volumes, IndiGo can deliver significant feed into the Turkish Airlines network which has the maximum number of cities connected globally. IndiGo enjoys a domestic market share of over 50 percent in India.

In the past, Turkish Airlines sought to increase its bilateral entitlements to India without much success so in a way this is a win-win for both airlines. Pandey adds that the wet-lease economics work very differently so the burden of selling and marketing the flights will fall on IndiGo.

“Interestingly by having to market a dedicated business product, IndiGo can get a sense of the nature of demand and responsiveness of the demand to price. This will be very helpful with its plans for product development and layouts on the A321neo and XLR that will start entering its fleet from 2024,” Pandey says adding that it is likely that one may see very aggressive marketing tactics as IndiGo puts up a fight not only on the domestic front but also a targeted fight on the international front.

Pandey is of the opinion that the wet lease also gives the airline a shorter option and thus a limited hit to cash flow in the event the flights do not deliver an adequate return in light of the macro-climate, currency fluctuations, and the Russia-Ukraine crisis.

author avatar
Ashwini Phadnis
Former Senior Deputy Editor at Business Line (aka The Hindu Business Line)

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