Challenge Airlines’ bold expansion and aircraft acquisition strategy

Challenge Group, an international air cargo conglomerate, offers tailored solutions across the aviation industry, including handling, logistics, and services. With over 1,000 employees, it operates three airlines, a commercial division, ground handling, road feeder services, aircraft leasing, and line maintenance.

With assets grounded for five years, the risk of diminished value looms large.

The company, spanning Israel, Belgium, and Malta, has tripled its capacity in four years, managing over 300,000 tonnes of cargo annually.

Challenge Group plans to augment its fleet with the acquisition of B777-300ER aircraft from Jet Airways. These aircraft, formerly used for passengers, are slated for conversion into freighters in collaboration with IAI. Despite continuous grounding since 2018, Challenge Group, renowned for restoring inactive aircraft, sees potential in reviving these assets. However, they stress the time sensitivity of the acquisition, highlighting the risk of deteriorating conditions during prolonged sale processes.

The longer the delay, the higher the cost of reactivating these non-airworthy planes, potentially making the deal economically unviable. With a proven track record in aircraft revitalization, Challenge Group urges a swift resolution to ensure a successful conversion, aligning with their strategic vision of fleet expansion and operational optimisation in the air cargo industry.

The delayed aircraft acquisition presents formidable challenges for Challenge Group. With assets grounded for five years, the risk of diminished value looms large. Extensive maintenance checks, including airframes, engines, APUs, and landing gear, coupled with adverse Indian climate effects, inflate operational costs.

Suboptimal preservation raises the spectre of corrosion and engine damage, further amplifying expenses. Extended restoration times compound the complexity and cost of reactivation. As the sale process lengthens, the aircraft’s condition deteriorates, escalating workloads and expenses beyond standard reactivation tasks.

The mounting costs could render the entire deal commercially unviable. Confidence in legal proceedings fuels anticipation for a favourable court order, emphasising the urgency of a timely resolution aligned with strategic and financially sound decisions.

In the face of numerous airlines filing for insolvency, Challenge Group maintains optimism regarding India’s aviation sector. Acknowledging the sector’s inherent dynamism and sensitivity to external factors, the group sees long-term potential. However, building trust among foreign aviation investors, commercial aircraft financiers, and lessors is crucial. The group emphasises the importance of responsive courts and regulatory support, stating that a smoother deal process would bolster confidence among financial organisations, further solidifying trust in the Indian aviation market.

Challenge Group is set to expand its presence in India, planning to triple its fleet and introduce 777-300ERSFs and 767-300BDSFs. The strategic expansion includes flying cargo routes from Hong Kong to Mumbai and facilitating transportation from India to the Middle East and Europe, showcasing the group’s commitment to growth and service diversification in the Indian aviation market.