CAN LEAS­ING BE MADE MORE AF­FORD­ABLE?

Min­istry of Civil Avi­a­tion Sec­re­tary R. Choubey re­cently called for greater par­tic­i­pa­tion from pol­icy mak­ers and users to pro­mote MRO ser­vices, of­fer train­ing, and pro­vide more at­trac­tive leas­ing pack­ages that could spur new ini­tia­tives for im­proved re­gio

SP's Airbuz - - Finance Leasing - BY BY­RON BOHLMAN, VAN­COU­VER/ CANADA

AS ANY START-UP AIR­LINE can at­test, a war chest of cash is an es­sen­tial thing to have on the com­pany’s check­list prior to the first flight. Not­with­stand­ing the ex­penses as­so­ci­ated with launch­ing ser­vice and day-to-day op­er­a­tions, a huge cash out­lay for ini­tial de­posits and pre­de­liv­ery pay­ments for the pur­chase of a fleet of new air­craft isn’t al­ways an op­tion. With­out a pre­vi­ous track record or ster­ling credit his­tory, a car­rier’s in­abil­ity to qual­ify for tra­di­tional fi­nanc­ing or its re­luc­tance to as­sume the risk of as­set ownership means that leas­ing is of­ten the most eco­nom­i­cal and sen­si­ble al­ter­na­tive, even in to­day’s low in­ter­est rate en­vi­ron­ment. REV­ENUE IN RU­PEES. EX­PENSES IN DOL­LARS. The Min­istry of Civil Avi­a­tion Sec­re­tary Ra­jiv Choubey’s call for lower air­craft lease rates is likely a con­se­quence of the coun­try’s chroni- cally low do­mes­tic air­fares that gen­er­ate the low­est rev­enue per pas­sen­ger-kilo­me­tre com­pared to lo­cal yields in Ja­pan, In­done­sia, Aus­tralia and Malaysia, ac­cord­ing to first-quar­ter 2016 IATA data. Re­duc­ing the cost of leas­ing air­craft would cer­tainly ben­e­fit fledg­ling re­gional air­lines yet rentals are com­monly paid in US dol­lars or eu­ros. The strength of those cur­ren­cies against the ru­pee poses a real chal­lenge for car­ri­ers to earn suf­fi­cient rev­enue to cover not only the monthly lease ex­pense, but other dol­lar-based costs as well, like fuel. Given the num­ber of new air­craft and seats to be added by AirAsia, IndiGo, Spice­Jet and Vis­tara, it’s un­likely that do­mes­tic air­fares will rise any time soon. If fares won’t go up, oper­at­ing costs must come down. SUP­PLY, DE­MAND, TIM­ING AND TECH­NOL­OGY. An­tic­i­pat­ing the need to re­place the world’s age­ing nar­row-body fleet, air­craft lessors went on a shop­ping spree be­tween

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