​IndiGo to rapidly replace A320ceo fleet to save costs

IndiGo plans to swiftly replace its Airbus A320ceo fleet with more cost-efficient A320neos, the Indian budget carrier’s chief financial officer has revealed.

IndiGo plans to swiftly replace its Airbus A320ceo fleet with more cost-efficient A320neos, the Indian budget carrier’s chief financial officer has revealed.

“We value the efficiency and structural low costs associated with our new Neo aircraft, and thus we will continue to substitute them for the older Ceo aircraft as fast as we can,” Aditya Pande said during a 2 June full-year results call.

“We are therefore taking deliveries of all our new Neo aircraft and balancing these fleet additions by returning all the Ceo aircraft that we had committed to earlier. Furthermore, depending on our capacity requirements, we will prioritise flying our Neos over the older Ceos.”

Cirium fleets data shows IndiGo has 123 A320ceos in its fleet and 102 A320neos. It also has 230 A320neos on order, scheduled for delivery until August 2030.

Pande adds that IndiGo’s A320ceos have a higher ownership cost than its Neos, driven by higher maintenance costs and the aircraft type’s greater fuel burn.

“As part of our fleet plan, we are working on naturally retiring a number of these Ceo aircraft. We will be taking the deliveries of new planes in quarter one and two of the current fiscal year 2021, which are much more cost-efficient and we are in discussions with manufacturers regarding deliveries beyond this period,” he says.

“Further, we have already financed [the] majority of the deliveries through operating lessors which will help in improving our liquidity.”

IndiGo is also looking to raise finance on its unencumbered assets. This plan comes on top of cost-saving measures worth Rs30-40 billion ($400-533 million), which include seeking lease rental deferrals.

“We have been talking to our lessors to freeze our supplementary rentals and better align these with our utilisation for a period of nine months. Since a large number of aircraft are currently grounded and will be operating at much lower utilisation levels going forward, thus there is no immediate need for us to provide for these,” Pande says.

“We have also reached out to our various suppliers to provide us more favourable credit terms. While we have paid dividends in the past, we will not pay dividends this year to conserve liquidity.”