Sky One Chairman advocates aircraft leasing as a strategic solution for navigating supply chain challenges

Various news reports anticipate that the global aviation industry will encounter a significant supply challenge in 2024. With an estimated 150 to 200 planes out of a total projected fleet of 789 facing grounding issues due to engine and supply chain shortages, Indian aviation is looking for solutions. Because despite substantial investments in new aircraft and fleet expansion by major Indian airlines, including IndiGo and Air India, the delivery of these new planes is expected to be delayed.
 
Post the oversight in aircraft manufacturing, triggered by an incident involving a Boeing 737 MAX 9 cabin blowout, regulators have tightened control over both the development and production phases of the aircraft.
 
At the recent Airline Economics’ Growth Frontiers Global Dublin conference, leaders of various airlines emphasised the urgency of accelerating the delivery of new aircraft. They also anticipate broader supply challenges in the upcoming months, noting that certifying any new airplane in the current scenario is expected to be more expensive and time-consuming.
 
Moreover, the existing infrastructure and resources may not be adequately equipped to efficiently manage the complexities and demands associated with certifying and bringing a new aircraft model into production. Consequently, the availability of planes is likely to be impacted, compelling airlines to explore alternatives such as leasing to bridge the gap between demand and supply.

“Driven by this complex interplay of factors,  including supply chain issues, the aircraft leasing market in India is expected to witness substantial growth in the upcoming months,” says Jaideep Mirchandani, chairman of global aviation conglomerate Sky One.

He says that leasing aircraft offers numerous advantages for both airlines and lessors, customised to meet their specific goals and needs. “The primary advantage is flexibility, enabling airlines to dynamically adjust their fleet size and composition in response to market demand, seasonal variations, and network expansion. Another significant benefit is cost-efficiency, as airlines pay for the aircraft’s usage rather than ownership, reducing upfront capital expenditure and depreciation costs,” adds Mr. Mirchandani.

Moreover, leasing fosters innovation by granting access to newer, more efficient aircraft models, enhancing performance, customer satisfaction, and environmental sustainability for airlines. “For lessors, it facilitates investment in cutting-edge technologies, enabling the provision of enhanced value-added services to their clients, ” says Mr. Mirchandani.

He says that the anticipated surge in leasing activities holds the potential for more lessors to diversify portfolios, enter the Indian market, and attract a broader customer base. The strategic significance of GIFT City (Gujarat International Finance Tec-City) as an aircraft leasing hub is pivotal in this scenario.

He adds, “The Government’s plans to establish an aircraft leasing hub align with the rapid growth of the Indian aviation market. The entry of more entities into GIFT City is viewed by the Government as a key developmental milestone in India, expected to attract additional aircraft leasing businesses to the country.”

(The author is Jaideep Mirchandani, and the views expressed in this article are his own)