IndiGo can raise Rs 3,000-Rs 5,000 crore by leasing its owned assets including aircraft and engines, Chief Executive Officer Rono Dutta told CNBC-TV18 in an exclusive interview.
"We own some aircraft, some ATRs, a lot of engines, some A320s. We are putting them back on lease. That will give us Rs 3,000-5000 crore of funding. I am quite optimistic about prospects od IndiGo," Dutta said.
The airline believes that the biggest opportunity to save costs lies in the fleet and hence has planned to focus on the efficiency of aircraft in use, lowering maintenance costs and is renegotiating contracts with suppliers for lower costs.
"Our relationship with lessors is a key success factor. We are working with lessors. We are paying all our bills. We are trying to reach an amicable solution with lessors. We are negotiating terms of new planes with lessors," Dutta added.
It is important to note that Dutta revealed that IndiGo will take delivery of around 120 fuel-efficient neo aircraft over the next 2 years and will simultaneously retire nearly 120 A320ceos.
"We have lots of new planes coming. The terms of new planes are for discussion...(in case of) the old planes, we have obligations and we are meeting them. We are returning 120 old planes, getting 120 or so new planes coming over 2 years. Those are under discussion," Dutta said.
This means that the capacity is expected to remain stable for the next two years at India's largest airline, IndiGo, and indicates a more cautious approach at the market amid COVID-19 pandemic.
It is also important to remember here that the airline has decided to cut employees' expenses by 25 percent. In that regard, it has already implemented salary cuts in the range of 5-25 percent in March, and leave without pay program was also announced in May.
"Right-sizing means don't grow too much but make the fleet more efficient. Our focus on employees is very sharp. The environment is hostile, we are doing 30 percent of capacity, demand is not there...we want to keep our focus on cost because if we don't do the necessary cost-cutting, the whole company will go down. We are taking baby steps at this time, we don't want to take big bold plunges into this," Dutta explained.
The airline, currently operating at 30 percent capacity, is desperate to scale up to 50 percent and further in a graded manner and remains optimistic about the demand to travel by air in India.
"We are at 30 percent, urging the government to take us to 50 percent. As soon as we get there, we will urge the government to take us to 70 percent. We see a stepped up-graduation in terms of demand. Our best forecast that it will be an 85 percent capacity by next year," Dutta added.
Having recently converted 10 passenger aircraft into freighters, the airline is now bullish on the cargo segment.
Recently, the company's management had told analysts in a post-earnings conference call that the IndiGo has planned to raise Rs 3,000-Rs 4,000 crore additional funding over a period of nine months.
The savings were expected to be a result of various measures including the freezing of supplementary rentals, arrangements with suppliers, and a modified delivery schedule. In addition, the airline has also decided to not pay any dividend this year due to the prevailing situation.
Meanwhile, the airline is flying A320neos over A320ceos to reduce cost amid a reduced scale of operations. The country's largest airline has also put on hold all discretionary expenses and has deferred certain CAPEX projects as well.