IndiGo and SpiceJet await rent relief – thanks to crisis at Boeing and Airbus

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  • Domestic airlines IndiGo and SpiceJet are seeking rent deferrals for up to six months as they work to tide over the coronavirus crisis.
  • Since March when COVID-19 was declared as a pandemic by the WHO, IndiGo and SpiceJet stocks have tanked by 25% and 50% respectively.
  • Both Boeing and Airbus expect aircraft leasing companies to offer liquidity assistance to airlines.
The Coronavirus pandemic has hit the airline industry hard. Now, domestic airline leaders IndiGo and SpiceJet are seeking rent relief from Boeing and Airbus – and they might just get it.

According to the latest report by Centrum Broking, both Boeing and Airbus expect aircraft lessors to support airlines in these times. “Given the tight liquidity position of the airlines, Airbus expects lessors to take the role of shock absorbers in the industry as they entered the crisis in a good shape,” said the Centrum Broking report dated May 8.

“Boeing too said the lessors played a key role in holding up the industry post 9/11 and it believes this time too it will be similar,” the report further added.

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Domestic airlines seek rent deferrals by six months

“Indigo has been seeking to defer payment of aircraft-lease rentals by at least six months. It is working towards this with its lessors,” an unnamed source told the Press Trust of India.

According to a Business Standard report, BOC Aviation, an aircraft lessor, could offer rent deferrals of up to 50% for three months to select airlines. Its customers in India include IndiGo, SpiceJet, GoAir and Vistara.
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IndiGo and SpiceJet stocks tank on Warren Buffet’s decision to dump airline stocks

IndiGo and SpiceJet stocks tanked after news broke that Warren Buffet dumped all US airline stocks.

IndiGo share price since MarchBSE / Business Insider India / Flourish

Shares of Interglobe Aviation which owns the IndiGo brand fell almost 7% to ₹927.5 on May 4 when the news broke.
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SpiceJet share price since MarchBSE / Business Insider India / Flourish

SpiceJet, on the other hand, slumped by almost 5% to ₹42.65.

SpiceJet’s Boeing 737 Max compensation to infuse liquidity into the airline

In addition to this, SpiceJet investors have another reason to cheer as Boeing has released $700 million compensation for the grounding of its 737 Max aircraft. SpiceJet has 13 Boeing 737 Max aircraft grounded on which it is incurring maintenance and lease payments. Its compensation is pegged at ₹540 crore, which should infuse some much-needed liquidity when SpiceJet finally receives it.
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Boeing has also resumed 737 Max production amid the Coronavirus crisis. The aircraft maker expects to get regulatory approval by September 2020 – analysts suggest this is a positive for SpiceJet as it has 13 Boeing 737 Max grounded right now.

See also:

When Warren Buffett feels 'fear', global markets quake

After GoAir and SpiceJet, IndiGo cuts salaries for employees ⁠— CEO says there was ‘no other option’

Boeing says it's about to start building the 737 Max plane again in the middle of the coronavirus pandemic, even though it already has more planes than it can deliver