IndiGo cleared for takeoff: Gets regulatory nod to wet-lease 11 A320 Aircraft; details inside

Against the backdrop of shifting market sentiment, the shares of Interglobe Aviation Limited witnessed an upswing of 0.69%. The company’s current market capitalisation is Rs 95,035.91 crore.

IndiGo, operated by Interglobe Aviation Ltd, is India’s leading low-cost passenger airline, serving 86 destinations, including 24 international ones. The airline adheres to its brand promise of offering “low fares, on-time flights, and courteous, hassle-free service” to passengers. IndiGo’s journey began in August 2006 with just one aircraft, and it has since expanded its fleet to 262 aircraft.

Yesterday the company obtained approval from the Directorate General of Civil Aviation (DGCA) to wet-lease 11 A320 aircraft.

What is a wet Lease? Now, think of wet leasing as a chauffeur-driven car service. You get the car (in this case, an aeroplane), but you don’t have to worry about flying it or taking care of it. Someone else (the leasing company) provides the pilot, and crew, takes care of maintenance, and even covers the insurance. You just pay for the ride.

This decision comes as IndiGo had to ground around 40 planes due to issues with Pratt & Whitney engines.

The engine manufacturer RTX, has announced the need to inspect and potentially replace 600 to 700 engines on Airbus A320neo jets between 2023 and 2026 due to a rare powder metal defect. IndiGo had already faced the need for wet-leased planes earlier this year when it introduced three wide-body B777 aircraft from Turkish Airlines to accommodate rising passenger traffic.

One impact of this wet lease is the likelihood of increased costs for airlines. Wet-leasing aircraft is typically more expensive than operating your own aircraft. This is because you have to pay the owner of the aircraft a fee, in addition to the costs of operating the aircraft.

However, we can anticipate an uptick in revenue for the company during the upcoming cricket world cup and festive season.

Increased Passenger Traffic: Major sporting events like the ICC World Cup often lead to a surge in air travel. Cricket fans from across India and other countries flock to the host nation to witness the matches. This influx of travellers can result in higher demand for domestic and international flights, which benefits airlines like IndiGo.

Peak Season for Travel: The festive season in India, which includes festivals like Diwali, and Christmas, is traditionally a peak season for travel. Families and individuals travel to their hometowns or take vacations during this time. This increased leisure and business travel can boost passenger load factors for airlines.

In addition to this, the stock has achieved multibagger status, delivering an exceptional return of over 177% over the last five years.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions.