Tigerair to sublease 12 aircraft to IndiGo as part of turnaround strategy

As part of its capacity and cost management effort in line with its turnaround strategy, Tigerair has reached an agreement to sublease 12 its surplus aircraft to Indian budget carrier IndiGo. 

Tigerair said in a statement on Thursday that this arrangement enables the airline to reduce excess capacity "significantly and hence lower related leasing cost".

Most of these aircraft were previously operated by Tigerair Philippines and Tigerair Mandala, and had been returned to the group upon its divestment of Tigerair Philippines in March 2014 and Tigerair Mandala's cessation of operations in July 2014.

These 12 aircraft will be progressively delivered to IndiGo over 6 months, starting Oct. Each aircraft will be subleased for between 3 and 4 years.

With the lease of one of the 12 aircraft expiring in 2018, only 11 of the aircraft will be returned to Tigerair at the end of their respective sublease periods.

Following their return, 7 of the 11 aircraft are expected to re-join the operating fleet, while the remaining 4 may be progressively re-introduced back to the service network within two years.

Given the current overcapacity situation in the industry, the 12 aircraft will be subleased at a discount to their original lease rates, said Tigerair.

Compared to the idling of these 12 aircraft, this sublease agreement will significantly reduce Tigerair's cash flow burden by about $162 million over the sublease periods.

Mr Lee Lik Hsin, Group CEO of Tigerair said: "The sublease agreement resolves our excess capacity issue and puts us in a better position to focus on our Singapore operations. We will actively explore options for the placement of the surplus aircraft subsequent to their return from IndiGo."

This latest development marks another step forward for Tigerair in the execution of its turnaround blueprint, which had included the paring or divestment of its stakes in non- performing "cubs", the cancellation of 9 aircraft ordered in 2007 and due for delivery in 2014-2015, and strategic alliances in advancement of its growth strategy.

Tigerair said it will continue to review its network operations and may trim its fleet by a further 2 to 4 aircraft if necessary.

maryanns@sph.com.sg