IndiGo Chief Executive Officer Rono Dutta told CNBC TV18 in an interview on Monday that the private airline can raise Rs 3,000 crore to Rs 5,000 crore by leasing its owned assets, including aircraft and engines. Airline revenues have been severely hit after they were shut down during a national lockdown to combat the coronavirus pandemic. Only some flights were restarted from May 25.
“We own some aircraft, some ATRs, a lot of engines, some A320s,” he said. “We are putting them back on lease. That will give us Rs 3,000-5,000 crore of funding. I am quite optimistic about prospects of IndiGo.”
Dutta said the airline plans to focus on the efficiency of aircraft in use, so as to reduce costs. It is also negotiating agreements with suppliers for lower costs. The airline is currently operating at 30% capacity.
“Our relationship with lessors is a key success factor,” Dutta said. “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.”
The chief executive officer also said that IndiGo will purchase around 120 fuel-efficient neo aircraft over the next two years and will simultaneously retire nearly 120 A320s. Therefore, the airline capacity will remain stable in the face of the pandemic.
The airline has cut employee expenses by 30%, and slashed employee salaries by 5% to 25% in March. It also implemented a leave without pay programme in May.
The environment is hostile, we are doing 30% 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,” Dutta said. “We are taking baby steps at this time, we don’t want to take big bold plunges into this.”
Dutta told The Economic Times in another interview that IndiGo will fly international flights, possibly to Gulf countries, by July. However, the Centre has not yet permitted international aviation to reopen.
“Our fixed costs are 40% of the system,” he said. “So flying 30%-40%-50% of our capacity, there is no way we can cover that and make a profit. We have to have enough planes in the air to cover fixed costs and then we can talk about profitability.”
Dutta said IndiGo wants to expand to 50% of capacity, then to 70% and finally to 85%, and asked the Centre to allow airlines to increase capacity. He said the airline believes its best case scenario for 2021 is passenger travel at 85% capacity.