India’s largest airline, IndiGo has signed a sale and leaseback agreement with BOC Aviation. The agreement covers 10 Airbus A320neo jets slated to delivered by the end of this year.
IndiGo expands BOC Aviation partnership
India’s leading airline, IndiGo has expanded its collaboration with lessor BOC Aviation as the airline signed a financial transaction with the lessor. This financial transaction is a sale and leaseback agreement which will cover 10 Airbus A320neo aircraft. CFM LEAP-1A engines will power these aircraft. The airline is aiming to take delivery of all these aircraft by the end of this year. IndiGo operates one of the largest fleet of Airbus A320neo family aircraft. BOC Aviation is an aircraft lessor listed on Hong Kong Stock Exchange. It has headquarters in Singapore and have offices at Dublin, London, New York and Tianjin.
Let us have a quick look at what is a sale and leaseback agreement?
Sale and Leaseback Agreement
In a Sale and Leaseback agreement, three parties participate – the Original Equipment Manufacturer (OEM), the Lessor, and the airline. Here is a step-wise guide :
- OEM delivers the aircraft to airline.
- Airline immediately sells the aircraft to lessor.
- The lessor then leases the same aircraft to the same airline.
In this way, lessor will earn lease rentals throughout the aircraft life as it is an asset. Meanwhile, airline has a benefit as major engineering checks and insurance duties are of lessor and not the airline. There are major disadvantages as well. For instance, airline loses the ownership of the aircraft but for an airline like IndiGo, this is a boon as it helps it to have young and more fuel efficient fleet.
CFM engines incoming
The airline in the recent past is having major issues with Pratt and Whitney engines. Raytheon Technologies, the parent company of P&W recently announced that it will need to inspect more than 1,000 engines across the globe because of a rare problem. A powdered metal used to manufacture some engine parts of PW1100 series is contaminating engine life. IndiGo recently sent 13 engines to P&W for checks and inspections.
IndiGo, with 40 aircraft grounded due to P&W problems, finds a boon in receiving aircraft powered by CFM engines. Pieter Elbers, Chief Executive Officer of IndiGo, stated during a recent earnings result that the airline will primarily receive aircraft equipped with CFM LEAP-1A engines moving forward.
Source Credits : BOC Aviation