IndiGo to own, financially lease more planes—a shift from its moneyspinner sale-and-leaseback past

The sale-and-leaseback model has been central to IndiGo's financial success and market domination in the last 19 years. Planes bought at competitive prices in large orders would be sold on delivery to aircraft leasing companies and leased back into service—resulting in significant profits, which then were ploughed back into expansion of its fleet.

The Gurugram-based airline aims to own and have on finance lease 40% of its planes by 2030, up from 18% now, chief executive officer (CEO) Pieter Elbers told Mint in an interview on Tuesday after the airline declared its earnings for the September quarter.

“More structurally, and to the heart of your question, we’re already revising our classic sale and leaseback model," Elbers said. “It’s how Indigo started 18-19 years ago, like many airlines. Now, we’re shifting to include financial leases and even some direct ownership."

As of this quarter, the carrier counted 14 planes it owned and 62 on financial lease. Of the remaining aircraft on its 417-plane fleet, 333 were on operating leases–mostly by way of sale-and-leasebacks–and eight were on so-called damp leases where the lessor provides not just the jets but also pilots, maintenance, and insurance.

The split of owned versus leased planes for 2030 is not known.

In financial leases, the aircraft is treated as an asset by the airline, which assumes all risks (or rewards) that come with ownership. Under operational leases, planes are bundled with services such as insurance and repair, and sometimes even pilots; for example, a damp lease.

This major strategy shift is driven by IndiGo’s ambition to expand internationally, add more wide-body aircraft, manage rising lease costs, and deal with volatile currency fluctuations.

By 2030, at the rate of a new plane being delivered every week, Indigo would add over 250 passenger jets to its fleet taking its total size to over 600 aircraft, industry estimates suggest.

GIFT edge

The financial lease will be routed through GIFT City, India's only operational international finance services centre, which is treated as a foreign jurisdiction by law.

Located in Gandhinagar, GIFT City has tax incentives and does not levy goods and services tax or stamp duty on leasing transactions and related documentatio. Specifically for the aviation sector, it has clearly defined rules on operating lease of aircraft, fine lease, hybrid structures, and streamlined compliance with aviation standards in India and overseas.

All this results in lower leasing costs for Indian airlines when leases are routed through GIFT City, besides allowing retention of financing profits in India.

Elbers' statement on leaning towards owning and financially leasing planes comes a day after IndiGo reported a loss of ₹2,582 crore in the second quarter of FY26, marking its second loss in as many years.

The airline's lease costs jumped over tenfold in the September quarter as the rupee fell against the dollar. Since lease payments are made in dollars, a 1.7% depreciation during the quarter caused a forex loss of ₹2,892 crore during the period,

Such losses are a direct consequence of its sale-and-leaseback strategy. This model, standard in the low-cost carrier (LCC) playbook, allowed IndiGo to acquire aircraft and lease them back, avoiding large upfront payments. However, it left the company vulnerable to fluctuations in foreign exchange rates and the impact of mark-to-market accounting. Mark-to-market means the value of leased assets must be updated in financial statements to match current market prices, which can make quarterly earnings appear more volatile.

This transition to having more of owned and financially leased planes gives the airline more control over timing and costs, helping smooth expenses and improve investor confidence.

“We now start to do financial lease issues through GIFT City, which is part of addressing that model. We do a couple of things; we have longer leases than we had in the past. We have leases now channel(ed) through GIFT City, which are financial leases rather than operational leases," Elbers, formerly president and CEO of the Netherlands' flag carrier airline KLM, said.

"Fit for purpose"

IndiGo wants to move away from its LCC image. A LCC or no-frills airline operates without services like free onboard meals instead betting on the lure of low fares.

Now, Indigo has adopted what Elbers called a "fit-for-purpose" operational model, tailoring its offerings to suit each route or market and reflecting the growing demand for premium travel experiences in India.

“People like to put labels–either you’re a low-cost or full-service airline–but reality is more nuanced. If Indigo is to be labeled, it’s a 'fit for purpose' operator," he said.

“In India, with its competitive and price-sensitive market, cost leadership is essential...If you want a meal (on domestic routes), that’s fine; you pay a little extra. If you want to fly as low-cost as possible, that’s fine too," said Elbers.

But the strategy changes for IndiGo when the airline operates international flights or longer routes defined as flights seven to eight hours long.

“Internationally, on longer flights (such as those to Europe), meals are included in base fares; on some shorter routes, customers can still opt in or out of in-flight meals. We adapt fare structures by market and route. If customer preferences shift, we’ll respond—but today, the lowest fare remains the top priority for most," the CEO said.

“We're not trying to force a full-service model onto an unwilling market, but offering what each market segment values most. This adaptability allows for both quality and competitiveness."

Own repair shop

Additionally, Indigo plans to establish a maintenance, repair, and overhaul (MRO) facility. An MRO facility is a specialized center where airlines maintain, repair, and overhaul their aircraft, enabling Indigo to manage its growing fleet more efficiently.

Elbers, who joined Indigo in September 2022, said, “We will also start an MRO. So we start already on that journey, and clearly, once we have that in place more than we have today, the impact of some of these forward reversions will also be adjusted." By reversions, he was referring to foreign currency expenses on servicing and repairing planes overseas.

The shift in leasing strategy comes as Indigo pursues international expansion. The airline has increased its international destinations from 22 to 45. Its international available seat kilometers (ASK)–a measure of an airline's passenger-carrying capacity, calculated by multiplying seats by distance flown–has grown to approximately 30% with a targetted 40% by 2030.

Elbers pointed out to an operational change happening at the Indian carrier that will help it hedge foreign currencies better.

"We are increasing our revenue base as a natural hedge when it comes to some of the currency (fluctuations). So the fact that we moved to Amsterdam–(revenues in) Euros, Manchester–pounds, Copenhagen–Euros... So we (are) kind of getting more non-rupee revenues in, which helps us to have a natural sort of hedge against some of the dollar rupee dynamics. That's the operational part."