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IndiGo explores Boeing 737 Max lease from Qatar Airways

2024-02-05

IndiGo, India's largest airline, is strategising to address a shortage caused by the grounding of aircraft due to Pratt & Whitney (P&W) engine issues. To alleviate this shortfall, the airline is contemplating the short-term damp lease of up to five Boeing 737 Max planes. These aircraft, less than four years old, are slated to be leased from Qatar Airways for a six-month period during the upcoming busy summer travel season.

In a damp lease arrangement, the lessor provides the aircraft, cockpit crew, and maintenance to the lessee, making it a relatively more expensive option than a standard lease. Maintenance responsibilities for the Boeing 737 Max aircraft will be overseen by Qatar Airways, while IndiGo will manage the cabin crew. This marks IndiGo's inaugural venture into operating Boeing 737 planes, having previously operated Airbus A320 aircraft.

Sources indicate that the leased aircraft will be exclusively deployed on the India-Qatar route, with Qatar Airways handling the business class sales. IndiGo has a similar arrangement with Turkish Airlines, operating two Boeing 777 aircraft on the India-Istanbul route.

This move comes as IndiGo faces challenges in securing enough used aircraft for short-term leasing, with the leasing market experiencing a shortage of available planes. The airline has had to ground approximately 75 Airbus A320 Neo aircraft due to the recall of P&W engines by US-based aerospace major RTX.

IndiGo acknowledges that capacity growth in the current January-March period will be 12% lower than the average 15-19% growth seen in previous quarters. The scarcity of used planes in the leasing market is attributed to global airlines retaining older aircraft due to capacity constraints and ongoing engine issues.

The recent restrictions on the expansion of Boeing 737 Max production, following the Alaska Air incident, are expected to further tighten the supply situation. Analysts from Ishka, specialising in aircraft valuation, reported a limited availability of Airbus A320 Ceo Aircraft for rent, with a 22% increase in the market value of a 5-year-old A320 Ceo compared to January 2022.

IndiGo, previously accustomed to returning aircraft after six years, now faces the necessity of retaining them for longer periods to address the existing shortfall. While IndiGo has effectively managed the challenges arising from grounded aircraft due to global P&W engine issues, the increased demand for alternative aircraft is expected to come at a higher cost, according to Sidhharth Nakhende, head of airline analysis at Ishka.