Akasa Air has signed a contract with Irish leasing company Griffin Global Asset Management for the sale and leaseback of five Boeing 737 Max aircraft, a statement said on Thursday, June 9.
Under the sale and leaseback model, the airline sells its planes to a leasing company and then leases them back. This frees up the cash that the airline has spent on buying the aircraft.
Sale and Leaseback, often known as junk financing, involves removing an asset from the lessee’s books and receiving upfront cash that can be used to pay down existing debts. As a result, the lessee’s existing lines of credit are not affected.
Businesses can use Sale and Leaseback deals to get finance for an amount that corresponds to the asset’s fair market value, which may be significantly higher than its book value. In India, there may be tax ramifications. However, by allowing a high-cost debt to be substituted with a low-cost lease duty, Sale and Leaseback may provide a financial gain.
Akasa Air had signed a deal with Boeing to purchase 72 Max aircraft on November 26, 2021, approximately three months after the Directorate General of Civil Aviation (DGCA) gave the green light to Max planes.
Akasa Air is scheduled to receive its first Max aircraft this month and is planning to launch its commercial flight operations in July.
“We have introduced to Akasa Air’s management team over a year ago and have watched with excitement as they skillfully built the airline from the ground up. We are honoured to enter into this long-term relationship right from Akasa’s launch. They have developed a business strategy that addresses a need in the market and assembled a very impressive team to execute that plan.”Ryan McKenna, CEO, Griffin Global Asset Management
A statement by Griffin Global Asset Management said it “is pleased to announce the mandate for purchase and leaseback of five Boeing 737-8 aircraft with Akasa Air, a new airline based in India”.
The airline, which is backed by ace investor Rakesh Jhunjhunwala and aviation veterans Vinay Dube and Aditya Ghosh, received the no-objection certificate (NOC) from the Ministry of Civil Aviation in August 2021 to launch commercial flight operations.
“We are pleased to have Griffin as our partners in growth as we embark on our aviation journey. The high degree of confidence and endorsement from the Griffin team is a testimony to Akasa Air’s robust and sustainable future.”Vinay Dube, Founder, Managing Director and CEO, Akasa Air
Griffin is a commercial aircraft leasing and alternative asset management business. Griffin works closely with airlines, OEMs, financiers, and other lessors to deliver customized fleet solutions and financings across the industry. Griffin’s long-term capital base is designed to support airlines through industry cycles.