As IndiGo declared a quarterly and yearly loss, the airline stated that it is working towards retiring its older fleet of A320ceo which will help the airline reduce costs drastically. The airline which re-started operations on May 25 in line with the government regulations has been able to operate only 20 percent of its approved summer schedule, about 13 percent lower than the government-mandated number as various state governments put a cap on operations.
Flashback
As IndiGo struggled to take delivery of its A320neo aircraft, thanks to the delay from Airbus and subsequent issues with the Pratt & Whitney engines, the airline started leasing aircraft from lessor to fill the void. This included excess aircraft with Tiger Air of Singapore as well as lease extension of its own aircraft. About 50 used aircraft from the secondary market were inducted.
An airline which intended to keep its fleet young and return the aircraft in the sixth year to avoid the expensive ‘D’ check was forced to operate the aircraft longer and also induct older aircraft operated by other airlines in the past. No wonder then that an airline which ordered only 100 A320ceo, ended the last quarter with 123 of the same type!
But in the last three quarters, the maintenance of these aircraft has been a big pain in terms of ballooning costs for IndiGo. In one of the earlier conference calls, the airline had quoted 63 paise per ASK as the cost for maintenance and expected it to go down significantly as the older aircraft go back.
Over the last two years, the airlines’ fleet structure has been undergoing a dramatic change. In December last year, the airline reached a milestone of 250 active aircraft in fleet and came within weeks of placing another mammoth order with Airbus. To understand how the decision to retire the A320ceos early, it is imperative to understand how the airline maintenance works.
How does airline maintenance work?
Aircraft maintenance involves everything from the engines to the seats. The heavier ‘D’ checks involve stripping of every single item in the cabin as part of the check. The life of a component is calculated in cycles and hours for an aircraft. A combination of the two dictates when the aircraft would be pulled out of active commercial service for maintenance. This is to avoid the aircraft being sent out twice – once for parts by cycles and once for parts by hours!
One cycle refers to one take-off and subsequent landing i.e. a single flight, while hours refer to the flying time. A flight from Mumbai to Delhi will be counted as one cycle and would have a flying time of one hour and forty-five minutes. If an aircraft is deployed to operate four flights between Mumbai and Delhi, this would be four cycles and seven hours of flying. However, if the same aircraft operated between Delhi and Chennai, it could be four cycles and ten hours of flying!
There is a rudimentary difference between servicing an aircraft and servicing anything else. An aircraft requires hanger space for a ‘C’ check or a ‘D’ check and is not a one-day affair. Based on the projected time frame and availability of such space – either in-house or at a contracted third-party facility, airlines plan the utilisation of the aircraft. Too late and an airline risks benching the aircraft till the scheduled maintenance, too early and the airline risks unnecessary additional costs.
As an aircraft nears a check, the operations and engineering teams work together to either put the aircraft in higher cycle patterns – examples of which are more flights on the shorter routes like Bengaluru–Kochi or Bengaluru–Chennai or on higher hour patterns – examples of which are more flights on the longer routes which keeps the cycles low and increases the flying hours.
How does the redelivery help the airline?
The last two months have seen the aircraft on ground. This neither increased the cycles nor the flying hours, pushing the checks a little further. Since the regulations as well as demand do not augur well for the entire fleet to be back in the air, the airline can rely on the A320neo which have a long life ahead of them and would not be due for any heavy checks any time soon, thus keeping a tab on the expenditure.
The airline can very well re-negotiate the terms with the lessor if the checks were part of the lease and if they weren’t but merely scheduled, the lockdown has ensured that the checks go beyond the lease window! In July – September quarter, the airline had said that it provisioned for Rs 3.2 billion as supplementary rental and aircraft maintenance, terming the second shop visits as expensive.
Tail note
The airline seems to make the most of the current situation by benching the A320ceos and postponing its maintenance leading to cost savings! The airline has to juggle between the three – lower cost of the A320ceos, higher fuel consumption compared to A320neo and higher maintenance. While earlier, this could get another pillar – lack of replacement of the Pratt & Whitney engines on the A320neos, the expected delivery of A320neos with CFM engines would take away that factor.
Ameya Joshi runs the aviation analysis website Network Thoughts.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
