Airlines look to trim rental expenses to support bottom line: Report

Indian aviation companies are renegotiating rental contracts in a bid to improve bottom lines as the industry took big hits globally and domestically due to the coronavirus pandemic. The losses are expected to continue as services have been sharply curtailed despite resumption.

Airlines have approached leasers for the deferment and reduction of rental costs and have received some concessions – such as partial deferment between three to eight months, experts told Mint.

Moneycontrol could not independently verify the report.

Among major players, IndiGo which has resumed 20 percent of operating capacity has managed to gain 50 percent relief on supplementary rentals (maintenance costs) – for grounded fleet. As per CFO Aditya Pande, since supplementary costs increase the more you fly, the cost does not accrue.

SpiceJet has also negotiated leasing costs, with a “lessor payments – majority of fixed costs mutually deferred or waived,” it said.

Rental costs – paid in US dollars and thus subject to currency fluctuations - comprise a significant 15 percent of an airline’s operating cost.

An official for a leasing firm told the paper the pain is not India-specific: “Situation remains grim for airlines across the world and Indian carriers are no exception. This is an extraordinary situation and everyone needs to be cognizant of the challenges faced by the sector."