Sale-and-leaseback: Why did IndiGo kill its golden goose?
The model is considered to be a basic fundamental behind the company's success story LATEST NEWS : A combination of factors ranging from a new accounting standard to lack of good value proposition for the A320 neo aircraft in the lessor market might have forced IndiGo to reconsider the sale-and-leaseback model — one of the basic fundamentals that contributed to the airline’s success story. With 118 of its 131 aircraft on operating lease, IndiGo has been the most active user of sale-and-leaseback financing under which a lessor will purchase the aircraft from the airline and lease it back. This removes the debt from the airline’s balance sheet and allows it invest its equity for some other purpose. Even though the company doesn’t agree to this, revenue from such transactions has helped to boost its profit. Industry sources say that the company makes a profit of $4-5 million per aircraft for each transaction. For the fourth quarter of FY17, 24 per cent of its tot...