IndiGo to own, financially lease more planes—a shift from its moneyspinner sale-and-leaseback past

The sale and leaseback model has been central to IndiGo’s financial success and market dominance over the last 19 years. Aircraft purchased in large orders at competitive prices are sold to aircraft leasing companies upon delivery and leased back into service; The result was significant profits, which were then plowed into expanding its fleet.

Chief Executive Officer (CEO) Pieter Elbers said the Gurugram-based airline aims to own 18 percent of its aircraft by 2030, including 40 percent through financial leasing. Mint He said in an interview Tuesday after the airline reported earnings for the September quarter.

“More structurally and to the heart of your question, we are already revising our classic sale and leaseback model,” Elbers said. “Like many airlines, Indigo started that way 18-19 years ago. Now we’re transitioning to include financial leases and even some outright ownership.”

As of this quarter, the carrier had 14 aircraft owned and 62 aircraft under financial lease. Of the remaining aircraft in its 417-plane fleet, 333 were under operating leases, mostly through sale and leaseback, and eight were under so-called temporary leases, in which the lessor provides not only the jets but also the pilots, maintenance and insurance.

The distinction between owned and leased aircraft for 2030 is unknown.

In finance leases, the aircraft is considered an asset with the airline assuming all the risks (or rewards) that come with ownership. Within the scope of operational leasing, services such as insurance, repair and sometimes even piloting are provided for aircraft; for example a damp tenancy agreement.

This major strategy shift stems from IndiGo’s ambition to expand internationally, add more wide-body aircraft, manage rising rental costs and deal with volatile currency fluctuations.

According to industry estimates, by 2030, Indigo will add more than 250 passenger jets to its fleet at the rate of one new aircraft delivered every week, bringing its total size to over 600 aircraft.

GIFT edge

Leasing will be routed through GIFT City, India’s only operational international financial services centre, which is legally considered a foreign jurisdiction.

Located in Gandhinagar, GIFT City has tax incentives and does not charge goods and services tax or stamp duty on rental transactions and related documents. Particularly for the aviation sector, it has clearly defined the rules for operating leases of aircraft, fee-leases, hybrid structures and facilitated compliance with aviation standards in India and abroad.

All this leads to lower lease costs for Indian airlines when leases are routed through GIFT City and also allows financing profits to be retained in India.

Elbers’ announcement to move towards owning and leasing aircraft came a day after IndiGo reported losses. ₹2,582 crore in the second quarter of FY26, marking its second loss in as many years.

The airline’s lease costs rose more than tenfold in the September quarter as the rupee fell against the dollar. Since lease payments were made in dollars, the 1.7% depreciation in the quarter caused a foreign exchange loss of 200 thousand TL. ₹2,892 crore during the period,

Such losses are a direct result of the sale and leaseback strategy. This model, standard in the low-cost carrier (LCC) playbook, allowed IndiGo to purchase and lease back aircraft while avoiding large upfront payments. However, this left the company vulnerable to fluctuations in exchange rates and the impact of mark-to-market accounting. Mark-to-market means that the value of leased assets must be updated in the financial statements to match current market prices; This could make quarterly earnings appear more volatile.

This shift towards having more owned and leased aircraft gives the airline greater control over scheduling and costs, helping to smooth expenses and increase investor confidence.

“We are now starting to address the financial leasing issues through GIFT City, which is part of addressing this model. We are doing a few things; we have longer leases than we had in the past. We now have leases that we lease through GIFT City, which are financial leases rather than operating leases,” said Elbers, former chairman and CEO of Dutch flag carrier KLM.

“Fit for purpose”

IndiGo wants to move away from its LCC image. LCC, or a no-frills airline, operates without services such as free meals on board, rather than being tempted by low fares.

Now Indigo has adopted what Elbers calls a “fit for purpose” operational model, adapting its offerings to suit any route or market and reflecting the growing demand for world-class travel experiences in India.

“People like to put labels on it, whether you’re a low-cost airline or a full-service airline, but the reality is more nuanced. If Indigo is to be labeled, it’s a ‘fit for purpose’ operator,” he said.

“Cost leadership is vital in India, with its competitive and price-sensitive market… If you want to eat (on domestic flights), that’s okay; you pay a little extra. If you want to fly as low cost as possible, that’s okay too,” Elbers said.

However, IndiGo’s strategy changes if the airline operates international flights or longer routes, defined as flights lasting seven to eight hours.

“Internationally, on longer flights (such as those to Europe), meals are included in base fares; on some shorter routes, customers may still accept or exclude in-flight meals. We adapt fare structures by market and route. We will respond if customer preferences change – but today the lowest fare remains the top priority for most,” the CEO said.

“We are not trying to impose a full-service model on a reluctant market, but we are offering what each market segment values ​​most. This adaptability allows for both quality and competitiveness.”

own repair shop

Additionally, Indigo plans to establish a maintenance, repair and overhaul (MRO) facility. The MRO facility is a specialized center where airlines maintain, repair and overhaul their aircraft, allowing Indigo to manage its growing fleet more efficiently.

“We are also going to launch an MRO,” said Elbers, who joined Indigo in September 2022. “So we are starting that journey now, and as we get that in place more than we have today, the impact of some of those forward returns will also be adjusted.” When he said return, he was talking about foreign exchange expenditures on the service and repair of aircraft abroad.

The shift in leasing strategy comes as Indigo continues its international expansion. The airline increased its international destinations from 22 to 45. International available seat mileage (ASK), a measure of an airline’s passenger carrying capacity calculated by multiplying seats by the distance flown, has increased to around 30%, with a target of 40% by 2030.

Elbers noted an operational change at the Indian airline that would help better protect foreign currencies.

“We’re increasing our revenue base as a natural hedge when it comes to some of the currencies (fluctuations). So the fact that we’re moving to Amsterdam – (revenue) Euro, Manchester – pound, Copenhagen – Euro… So we’re kind of getting more non-rupee revenue, which helps us provide a natural hedge against some of the dollar rupee dynamics. That’s the operational part.”