SpiceJet to buy 100 new Boeing planes, eyes India expansion

A Boeing 737 MAX 8 airliner lifts off for its first flight on January 29, 2016 in Renton, Washington.
Stephen Brashear | Getty Images

Indian budget carrier SpiceJet said on Friday it had agreed to buy 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.

"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," Ajay Singh, SpiceJet's chairman, told a news conference in New Delhi.

Asian airlines are driving much of the growth in big planemaker order books, and analysts expect India's market to grow substantially over the next decade as millions fly for the first time each year.

Indian airlines such as the biggest, InterGlobe Aviation's IndiGo, as well as GoAir have collectively ordered hundreds of new planes from Airbus.

SpiceJet said it had signed a deal for buying up to 205 planes from Boeing - worth up to $22 billion at list prices - but the announcement includes 55 jets already announced in a 2014 deal and the possible follow-on order of 50 more.

A source told Reuters on Thursday that SpiceJet was set to announce an order for as many as 100 new planes.

It was not immediately clear if the order adds to Boeing's previously announced tally. However, the company previously posted an order for 100 737 MAX jets from an unidentified customer that counted as part of its 2016 tally.

Low-cost long haul?

SpiceJet, which has a current fleet of around 40 planes, will start getting 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.

SpiceJet's Singh said he was weighing up various options for financing the new purchase, including sale and leaseback, but he ruled out issuing more debt to pay for the planes.

He said the additional purchase rights also include an option to buy wide-body aircraft for long haul journeys as the airline considers launching low-cost long distance flights.

SpiceJet, which was briefly forced to ground its fleet in late 2014 when it ran out of cash, has about 13 percent of the Indian air passenger market. That is behind market leader IndiGo, Jet Airways and state-run Air India.

Most Indian airlines 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.

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