Whalesbook
Akasa Air Establishes GIFT City Unit for Aircraft Financing
Akasa Air has officially established Akasa Air Leasing IFSC Private Limited (AALI) in Gujarat International Finance Tec-City (GIFT City). This move will enhance the airline's aircraft financing and leasing for fleet expansion. AALI leverages GIFT City's environment, offering tax benefits and regulatory clarity to attract aviation finance.
Securing Capital for 226 New Aircraft
AALI aims to give Akasa Air more flexibility and cost savings for fleet funding. The airline operates 38 Boeing 737 MAX aircraft and has ordered 226 more. AALI will finance most of these future jets, lessening dependence on overseas leasing and seeking international capital at better rates. Akasa Air recently secured significant funding, including a $125 million round in August 2025 from investors like Premji Invest and 360 ONE Asset. The airline's revenue rose 49% year-over-year in FY2025, though losses also widened.
Competitors Also Choose GIFT City for Leasing
Akasa Air's move to GIFT City mirrors its larger Indian competitors. IndiGo, India's largest airline, uses its finance company, InterGlobe Aviation Financial Services IFSC Private Limited (GCE), from GIFT City to fund its extensive fleet. GCE has financed over 30 Airbus A320neo family jets and plans to finance most of IndiGo's future aircraft. Air India also has AI Fleet Services IFSC Limited (AIFS) in GIFT City, which has handled significant deals like a $215 million loan for six Boeing 777-300ER aircraft and a $300 million payment to lessors. These actions highlight GIFT City's rise as a key aviation finance center, challenging hubs like Dublin and Singapore.
Challenges in the Indian Aviation Market
Despite these strategies, the Indian aviation sector faces significant financial pressure. High jet fuel prices and Middle East tensions have prompted airlines like Air India and IndiGo to warn about potential operational cuts. Aviation Turbine Fuel (ATF) now forms a large part of operating expenses, and longer flight paths due to airspace limits increase costs further. While Akasa Air is private, its competitors, IndiGo (NSE: INDIGO) and Air India (state-owned), operate in this tough market. IndiGo has nearly 950 aircraft on order, while Air India plans for over 570 planes. About 85% of airline aircraft are leased from foreign companies, making efficient financing crucial but also exposing airlines to currency swings and global economic changes. The aircraft leasing market is expected to grow but faces limited supply and rising interest rates, which will raise financing costs.
Strategic Move for Long-Term Growth
Establishing AALI in GIFT City is a key part of Akasa Air's plan to support its fleet growth to 226 Boeing 737 MAX aircraft by 2032. This helps the airline manage financing in India's fast-changing aviation market and global financial climate. With competitors like IndiGo and Air India also using GIFT City's financial services, Akasa Air's strategy reflects a broader industry shift towards handling aircraft financing and leasing domestically to cut costs and improve flexibility.