Overcapacity flies to airlines' rescue

Each leased aircraft earns Jet, Air India Rs 55 crore annually

Overcapacity has turned out to be a blessing in disguise for India’s loss-making airlines. Two of the country’s full-service carriers – Air India and Jet Airways – are earning a fortune by leasing out excess capacities.

What works in their favour is that income from such lease rentals is generally around 1.25 per cent of the cost of a new aircraft. In other words, leasing out a plane fetches an airline around Rs 55 crore per aircraft annually. Jet Airways has leased out seven aircraft while Air India is in talks to lease out six.

Jet has already tied up an annual rent of over Rs 220 crore for four aircraft and will start earning from three more soon. Last year, the private carrier had leased out four Boeing aircraft to Turkish Airways. It recently leased out another three to Thai Airways.

“We are earning $1 million (around Rs 4.5 crore) per Boeing aircraft per month. We will start getting the same amount on three more from next month,” a senior Jet Airways executive, who did not want to be identified, said.

With a fleet strength of 82, Jet Airways, after losing in the first two quarters of the last financial year, earned a profit of Rs 106 crore in the third quarter. In 2008-09, Jet suffered a loss of Rs 402 crore.

National Aviation Company Ltd, which runs Air India, is also in talks to lease out three Boeing 777 aircraft. It plans to lease out another three soon. “We are currently negotiating for leasing out three Boeing aircraft, which will fetch us around Rs 168 crore annually. We will be leasing out three more, for which negotiations will start later,” an Air India executive said on condition of anonymity.

The national carrier has a fleet of 110 and has already leased four freighters for around $200,000 (around Rs 90 lakh) per month per aircraft. It is also negotiating for other freighters. Currently, these fetch the airline Rs 43 crore annually per aircraft.

Air India has an operational loss of around Rs 400 crore per month and has losses of over Rs 7,000 crore on its books. The airline received Rs 800 crore equity from the government in the last financial year and will receive Rs 1,200 crore this financial year.

Vijay Mallya-owned Kingfisher Airlines, however, has not leased out any aircraft. “As a matter of fact, we need more aircraft,” said a source in Kingfisher Airline.

Low-cost carriers like GoAir, SpiceJet and Indigo have also not leased any aircraft as they are doing relatively better and have been utilising their capacities in full.