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IndiGo and BOC Aviation Limited have entered into a finance lease transaction for ten Airbus A320NEO aircraft. These aircraft will be equipped with CFM LEAP-1A engines, reflecting the airline’s commitment to modern technology.
Steven Townend, the Deputy Managing Director and Chief Financial Officer of BOC Aviation, expressed contentment with the transaction, underscoring the company’s adeptness in utilising alternative financing structures for sustainable growth. The deal not only solidifies the partnership between the two entities but also empowers IndiGo to augment its fleet with cutting-edge aircraft, he explained.
IndiGo boasts an order book nearing 980 aircraft, which includes a recent acquisition of 500 Airbus A320 family aircraft. Riyaz Peer Mohamed, Chief Aircraft Acquisition and Financing Officer at IndiGo, shared, “We are pleased to enhance our partnership with BOC Aviation with the lease agreement for these 10 aircraft. This extended collaboration with BOC Aviation is part of our expansion strategy across domestic and international markets. India’s civil aviation sector is witnessing remarkable growth, and these aircraft will bolster IndiGo’s presence in the region.”
Improved liquidity
In the first quarter of the fiscal year 2023-24, IndiGo recorded a net profit of ₹3,090 crore, marking its highest-ever quarterly net profit. Gaurav Negi, the CFO of IndiGo, elaborated on the company’s aspirations, saying, “Given our strong liquidity position, we are planning to invest in some aircraft and related assets. The extent of our free cash flow has been increasing. One of the avenues of capital deployment we are considering, is the acquisition of aircraft and related equipment. This could encompass engines or even smaller aircraft like the ATR.”
IndiGo has ventured into a separate venture capital firm to further its objectives in this domain.
The airline’s robust operational and financial performance has led to an improved liquidity position. As of the end of the June quarter, the company reported a free cash of ₹156.9 billion, marking a net increase of ₹35.0 billion compared to the end of the previous quarter.
Additionally, the quarter concluded with a capitalised operating lease liability of ₹430.9 billion, and the total debt, inclusive of the capitalised operating lease liability, amounted to ₹462.9 billion. The fleet also witnessed a net addition of 12 aircraft, and the right to use assets at the quarter’s end were valued at ₹282.0 billion.
During the recent earnings call, an analyst asked the rationale behind IndiGo’s shift in approach toward aircraft acquisition, given the airline’s past inclination to shelve such plans. Negi addressed this query, explaining, “As a result, we are going back to that similar philosophy of allocating capital towards acquisition of these assets that we’ve done in the past.”
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