Session Five :

Finance Panel: Exploring the use of innovative leases to enjoy very competitively priced financing for aircrafts purchases

To launch a B2B website enabling online shopping

With increasing load factors from the Indian metro routes along with emerging non-metros, the Indian carries are on the verge of expanding their fleet to meet the rising demand. Though more and more carries are sending aircraft orders to manufacturing companies based overseas. While buying an aircraft is not possible for most carries, leasing aircraft is more popular. This was the discussion which was taken up at the fifth business session of the day, moderated by David Huttner, Managing Director, Planely. The other panelists were G P Gupta, Chief Finance Officer, Go Air; Kiran Koteshwar, Head of Project and Planning, SpiceJet; Giovanni Tramparulo, Chief Finance Officer, ATR and V K Suri, GM – Finance, Air India.

Explaining about the increasing demand from the aviation sector for aircraft, Giovanni Tramparulo, Chief Finance Officer, ATR said, “We delivered about 24 aircraft in 2006 and 42 in 2007. This year we are going to deliver more than 60 aircraft to the global carriers, while it is predicted that in next ten years the market will require 1000 aircraft annually. This explains the exponential growth of air travel.”

V K Suri, GM- Finance, Air India, informed that borrowing aircraft is not only cost effective but also tax effective. “There are various options for a carrier to lease aircraft, but we at Air India usually carry out external commercial borrow. Though this allows us to save tax but the cost altogether is the same.” There are other options like plain vanilla structure and lease financing for aircraft leasing, though the later is more innovative and accepted by majority of Indian carriers. Echoing similar thoughts about leasing, G P Gupta, Chief Finance Officer, Go Air said, “Pre Delivery Payments (PDP) is the most important factor the airline have to think about before buying an aircraft.” Discussing the issue of ATF which is killing the airlines at present, Kiran Koteshwar, Head of Project and Planning, SpiceJet said, “It is because of the rising ATF prices that the aviation industry is not growing at faster pace for the past six months in India. To compensate with the rising costs, we believe in wet leasing systems to retain the cash flow.” With the rising demand, the airlines have to follow innovative ways to make airline profitable, in the scenario where the operational charges are going high and oil prices are touching the sky.