IndiGo to raise Rs 3,000-Rs 5,000 crore by leasing aircraft, engines: Ronojoy Dutta

IndiGo can raise Rs 3,000-Rs 5,000 crore by leasing its assets, including aircraft and engines, Chief Executive Officer Ronojoy Dutta told CNBC-TV18.

"We own some aircraft, some ATRs, a lot of engines, some A320s. We are putting them back on lease. That will give us Rs 3,000-5000 crore of funding. I am quite optimistic about the prospects of IndiGo," Dutta said.

The airline believes that the biggest opportunity to save costs lies in the fleet and hence plans to focus on the efficiency of aircraft in use. The country's largest airline is also lowering maintenance costs and renegotiating contracts with suppliers.

"Our relationship with lessors is a key success factor. We are working with lessors. We are paying all our bills. We are trying to reach an amicable solution with lessors. We are negotiating terms of new planes with lessors," Dutta added.

IndiGo will take the delivery of around 120 fuel-efficient neo aircraft over the next two years and would simultaneously retire another 120 A320ceos, he said.

"We have lots of new planes coming. The terms of new planes are for discussion...(in case of) the old planes, we have obligations and we are meeting them. We are returning 120 old planes, getting 120 or so new planes coming over two years. Those are under discussion," Dutta said.

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This means that the capacity is expected to remain stable for the next two years but indicates a more cautious approach amid the COVID-19 pandemic.

The airline has decided to cut employee expenses by 25 percent. It has already implemented salary cuts in the range of 5-25 percent in March, and a leave-without-pay programme was also announced in May.

"Right-sizing means don't grow too much but make the fleet more efficient. Our focus on employees is very sharp.  The environment is hostile, we are doing 30 percent of capacity, demand is not there...we want to keep our focus on cost because if we don't do the necessary cost-cutting, the whole company will go down. We are taking baby steps at this time, we don't want to take big bold plunges into this," Dutta said.

The airline wants to scale up to 50 percent and further in a graded manner and remains optimistic about the demand to air travel in India.

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"We are at 30 percent, urging the government to take us to 50 percent. As soon as we get there, we will urge the government to take us to 70 percent. We see a stepped up-graduation in terms of demand. Our best forecast that it will be an 85 percent capacity by next year," Dutta added.

Having recently converted 10 passenger aircraft into freighters, the airline is now bullish on the cargo segment.

Recently, the company's management told analysts in a post-earnings conference call that the IndiGo planned to raise Rs 3,000-Rs 4,000 crore in additional funds over a period of nine months.

The savings were expected to be a result of various measures including the freezing of supplementary rentals, arrangements with suppliers, and a modified delivery schedule. In addition, the airline has also decided to not pay any dividend this year.

The airline is flying A320neos over A320ceos to cut costs amid a reduced scale of operations. It has also put on hold all discretionary expenses and has deferred certain CAPEX projects as well.

Source: CNBC-TV18