IndiGo and SpiceJet await rent relief – thanks to crisis at Boeing and Airbus
- Domestic airlines
IndiGoand SpiceJetare seeking rent deferrals for up to six months as they work to tide over the coronaviruscrisis.
- 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.
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.
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.
IndiGo and SpiceJet stocks tank on
IndiGo and SpiceJet stocks tanked after news broke that Warren Buffet dumped all US airline stocks.
Shares of Interglobe Aviation which owns the IndiGo brand fell almost 7% to ₹927.5 on May 4 when the news broke.
SpiceJet, on the other hand, slumped by almost 5% to ₹42.65.
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.
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.
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