RIP SLB model? The asset light model of airlines could soon be history

For many years, the much discussed topic in Indian aviation was income from “Sale and Leaseback”, popularly known as SLB. In 2010, when Kingfisher was on a downward spiral and faced engine issues, two things were talked about – the Power By the Hour (PBH) agreement of IndiGo which operated the same type of engines and the income from SLB aiding IndiGo with profitability, in addition to the single fleet model of the airline.

Years later, as the lockdown gets extended and airlines are finding ways to cut costs amidst the grounding, the SLB model is coming back into focus – this time for its disadvantages. All major airlines in India, except national carrier Air India have placed large orders with Airbus and Boeing and going forward could see a change in the way business is done.

How do airlines induct planes?

Buying an airplane is one of the most complex negotiations. Nothing comes on a platter, costs change based on what the airline opts for and one cannot buy it off the shelf. Airlines are known to get heavy discounts over the list prices and there could be more freebies involved if an airline decides to switch aircraft type from Airbus to Boeing or vice versa.

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