Tiger Airways Inks Deal With IndiGo To Sublease 12 A320s

Friday, 10th October 2014 at 08:35am

The deal that both airlines signed recently will allow Tiger Airways to reduce operating costs, as well as trim excess capacity in its bid to focus on a 'right-size operations'.

The twelve A320 aircraft that IndiGo will sublease from the Singapore-based carrier will be used for its aggressive route and capacity expansion program in the next few years as India's travel market will experience an exponential growth, according to industry analysts.

Majority of the aircraft were previously operated by the Tigerair group's affiliates, Tigerair Mandala and Tigerair Philippines. The ones used by Tigerair Philippines were returned to the group after the holding company sold its stake in May this year to another Philippine LCC. Tigerair Mandala has folded up in July this year and surrendered its fleet to its mother unit in Singapore.

Tigerair will deliver the aircraft to IndiGo in a staggered basis over a period of six months which started last October. They will stay with IndiGo between three and four years and will be returned upon the expiry of the sublease contract.

The airline further disclosed that upon their return, the 12 aircraft will then be used again for possible future operations expansion.

In the meantime, Tigerair will give up some of its excess aircraft to lessen its financial burden and operating costs by about S$162 million (US$128) during the sublease period. Overcapacity is the main reason why the airline decided to sublease some of its aircraft.

The 12 aircraft would have incurred more to the group if they remain with them as cost for keeping unused aircraft is very high as they are also on lease.

The group has already explored various ways to reduce its financial burden and comply with the general corporate funding requirements to strengthen its balance sheet.

With the 12 aircraft on a sublease, the group will now be able to resolve overcapacity issue and position itself better to focus on their core operations in Singapore.

The group's CEO, Lee Lik Hsin, said that this early, however, they are already exploring options as to what they will do with the 12 aircraft upon their return.

By: Pete Lee.