Aircraft investors: look no further than India for fleet financing ventures

By all measures, India’s travel markets and economy have experienced extraordinary levels of growth in recent years. Naturally, aviation has been both a beneficiary and benefactor of this growth, with demand for the sector soaring to new highs.

Multiple initiatives on the Indian Subcontinent – whether considering the Regional Connectivity Scheme, major infrastructure improvements or pushes for more bilateral air service rights – are all causation for Indian airlines to seek new aircraft.

In fact, in the recently published CAPA India Aircraft Fleet & Finance Report 2018, the conclusion is that Indian airlines will require an estimated USD50 billion in financing to support projected deliveries until 2027.


  • Indian airlines now have more than 1000 firm aircraft orders – the third largest order book in the world, reflecting the positive outlook for growth.
  • Narrowbodies account for more than 90% of the orders.
  • Sale and leaseback transactions have been the mainstay for financing India’s fleet.
  • With an average of close to 100 aircraft scheduled for delivery in each of the next five years, Indian carriers will need to attract a large pool of lessors to participate in the market.

Close to 100 aircraft are to be delivered to Indian airlines each year for the next five years. This is by far the greatest volume of aircraft induction in the history of Indian commercial aviation. Projected fleet expansion represents a major opportunity for aircraft investors looking to deploy capital in new generation assets.

However, despite the strength of underlying demand, operators in the Indian market face a number of challenges.

On the cost front, Indian airlines pay some of the highest fuel taxation in the world and also incur taxes on aircraft leases, while on the supply side, infrastructure and skills shortages (particularly commanders) are potential constraints on growth.

Positive market conditions have led Indian airlines to place bets on unprecedented expansion. India’s domestic market has grown at approximately 20% per annum for each of the past three years, and similar growth is expected in the current financial year.

At the same time, international traffic has also grown steadily at 8-10% per annum in recent years. With strong demand fundamentals and high liquidity in aircraft financing, airlines have taken advantage of the environment to place orders for more than 700 aircraft since 2014. The total order book has now crossed 1000 aircraft, making it the third largest in the world behind those of the United States and China. And CAPA expects that a further 100 widebodies could be ordered within the next 12 months.

India’s fleet inductions are dominated by new aircraft

Indian airlines prefer new aircraft and have largely met their requirements by placing orders directly with manufacturers. Even most of the aircraft being taken on lease, e.g. by Air India, are brand new.

IndiGo has recently been taking some older aircraft on lease, however these are mostly short term inductions to provide replacement capacity for planned A320neo deliveries that have been delayed due to engine issues. As a result of taking new equipment, airlines benefit from lower fuel burn and maintenance costs, higher dispatch reliability and an improved customer proposition. The placing of large orders directly with OEMs also results in significant support from the manufacturer.

The sheer scale of deliveries may require the participation of 25+ lessors each year. Assuming that lessors are, on average, willing to add 3-4 aircraft each in the market, more than 25 lessors may need to take exposure to India each year. Despite the availability of aircraft financing, Indian airlines may be chasing lessors more than lessors chasing airlines.

These data are extracted from a larger report by CAPA India. To request a complimentary copy of Part 1 of the full report visit: CAPA India Aircraft Fleet & Finance Report 2018

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