AIRCRAFT LEASING AND FINANCE

Aircraft financing is a big-ticket activity which has seen an ascendency as aviation companies are buying additional aircraft

- ZORAWAR SINGH JAISWAL

THE PRESENT CENTURY HAS witnessed a colossal increase in the demand for aircraft that are fuel-efficient, faster, technologically better, safer and provide greater luxury on board. As a result, old aircraft are being replaced even before the expiry of their total technical life. An aircraft is expensive. Consequently, there is a need to secure loans or leases to acquire expensive aircraft. The current economic slowdown in the Indian economy and the reluctance of banks to finance large expenditures have caused a liquidity crunch. Hence, airlines are diversifying their financier base. The challenges of securing aviation finance and the peculiarities of this sector can be overcome by a mix of funding sources.

FINANCING NEEDS. The recent surge in global trade has induced mass movement of manpower and materials. This has led to the emergence of new markets for the aviation sector. The existing airlines saw this opportunity and started acquiring additional aircraft to satiate this emerging demand. With more people willing to spend on air travel, airlines procured new aircraft. When an airline acquires a new aircraft, it tries to sell off the old one. This has not been easy because new players prefer to buy smaller aircraft directly from the manufacturers instead of going for old stock. Consequently, the old unsold inventory blocks potential liquidity.