SpiceJet plots expansion with order for
100 new Boeing planes
Send a link to a friend
[January 13, 2017]
By Aditi Shah and Tommy Wilkes
NEW DELHI (Reuters) - Indian budget airline SpiceJet said on Friday it
has agreed to acquire 100 new MAX 737 aircraft from Boeing, with an
option for 50 more, as part of its expansion plans in the world's
fastest growing aviation market.
The deal is a welcome boost for Boeing in India, where SpiceJet is the
U.S. company's only major customer among the budget carriers now
dominating the country's air industry.
"This is an extremely competitive market," Ajay Singh, SpiceJet's
chairman, told a news conference in New Delhi.
"What this aircraft order does is enhance our ability to be competitive
in the future as it helps us reduce costs," said Singh, whose airline
has about 13 percent of the Indian passenger market, while market leader
IndiGo has 40 percent.
SpiceJet, which was briefly forced to ground its fleet in late 2014 when
it ran out of cash, is the fourth-largest Indian airline behind
InterGlobe Aviation's IndiGo, Jet Airways and state-run Air India
Asia, especially India, is a key market for planemakers, with analysts
expecting Indian passenger numbers to more than triple over the next 20
years as millions more people become wealthy enough to fly for the first
Combined, local airlines like IndiGo, as well as GoAir, have already
ordered hundreds of new planes from Airbus.
Meanwhile Boeing estimates India will need 1,850 new aircraft worth $265
billion by 2036 to meet demand for air travel.
SpiceJet said altogether it has signed a deal to acquire up to 205
planes from Boeing, worth up to $22 billion at list prices, but that
total includes 55 jets already announced in a 2014 deal and the possible
follow-on order of 50 more.
A source familiar with the deal had said on Thursday that SpiceJet was
set to announce an order for as many as 100 new planes.
Boeing had already reported an order for 100 737 MAX jets from an
unidentified customer that counted as part of its 2016 tally, and on
Friday confirmed that order to be SpiceJet's.
Shares in SpiceJet rose as much as 3 percent on Friday.
[to top of second column]
A SpiceJet Boeing 737-800 aircraft taxis on the tarmac after landing
at Chhatrapati Shivaji international airport in Mumbai November 26,
2012. REUTERS/Danish Siddiqui/File Photo
LOW-COST LONG HAUL?
SpiceJet, which has a current fleet of more than 40 planes, will take
delivery of the first of its new jets in the third quarter of 2018,
Dinesh Keskar, senior vice president of Asia Pacific & India Sales at
Boeing, told reporters.
The carrier is expected to have secured a hefty discount from the
aircraft list prices, as is common with large orders.
"As part of this transaction they (Boeing) have not only been kind
enough to give us good commercial terms but have worked hard to reduce
the maintenance cost of the fleet going forward," said Singh.
He said he was weighing up various options for financing the new
purchase, including sale and leaseback, but he ruled out issuing more
debt or raising equity to pay for the planes.
The new aircraft increases the range of SpiceJet's flights by up to one
hour, opening up many more destinations, including international ones,
Singh told reporters.
He said the additional acquisition rights also include an option to buy
wide-body aircraft for long haul journeys as the airline considers
launching low-cost long distance flights.
Most Indian carriers have returned to profitability in recent years,
thanks in part to lower fuel costs, but challenges remain as carriers
struggle to translate surging demand into sustainable profits because of
cut-throat competition and high running costs.
(Reporting by Aditi Shah; Writing by Tommy Wilkes; Editing by Randy
Fabi, Greg Mahlich)
[© 2017 Thomson Reuters. All rights
Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.