Kingfisher to wet lease 4 new Airbus to Air India

Vijay Mallya-led Kingfisher Airlines will wet lease four of its new Airbus long haul aircraft, which it will receive from April onwards to the public carrier Air India.

Kingfisher will receive one Airbus A340 in the first week of April, which was initially expected to be delivered in March. The other three Airbus will arrive in the subsequent months.

The two A340 have already been mandated to be for the US market by Kingfisher while the two A330s will be for the European market and will fly to London from Delhi and Mumbai respectively.

Under wet lease as opposed to dry lease, a carrier leases its aircraft to someone else along with its crew. Whether the aircraft will be painted in Air India?s colours and the crew will wear Air India uniforms is still unclear.

The first A340 will fly from Bangalore to San Francisco non-stop when kingfisher receives its clearance to fly overseas. Recently civil aviation minister, Praful Patel said that Kingfisher would be allowed to fly international routes as it had become part of Deccan, which will complete five years of operation in August this year and thereby be eligible to fly abroad.

Kingfisher recently decided to merge into low cost carrier major Deccan Airways. This was done so that Kingfisher can fly under Deccan?s licence.

Analysts say this move was one of three options Mallya had to fly international and garner better revenues in a high loss making domestic air travel industry.

Currently, a domestic airline needs five years domestic experience along with a fleet of at least 20 aircraft to be eligible to fly overseas.

Kingfisher is expecting around 18 Airbus deliveries over the next one year. Of these, it is expected to operationalise just eight as part of Kingfisher, while the others will be put on lease or leaseback with Airbus to make a profit of around $50 million in the process.

Kingfisher and Deccan currently operate a combined fleet of 78 Airbus and ATR planes. Kingfisher has 106 Airbus planes on order — including five superjumbo A380s — while Deccan has 54 Airbus A320 family aircraft pending delivery.

Kingfisher Airlines has accumulated losses of around Rs 1,200 crore and Deccan Aviation has losses of at least Rs 800 crore, which, if they continue as separate firms, can be set off against profits.

Tax experts say a clever structuring of the merger deal is possible. Kingfisher?s loss was on a revenue of Rs 1,553 crore.