SpiceJet Eyeing Expansion in India Buys 100 Boeing Planes
India budget air carrier SpiceJet announced Friday that it agreed to purchase 100 new Boeing MAX 737 planes with the option to purchase an additional 50, as part of the expansion plans it has in the fastest growing aviation market worldwide.
The deal gives a welcome boost to Boeing in the second most populous country in the world, where SpiceJet is the aircraft maker’s only big customer amongst the budget carriers that now dominate India’s air industry.
The chairman of SpiceJet, Ajay Singh said Boeing, as part of their transaction, not only gave the airline solid commercial terms, but has worked hard in reducing the maintenance costs going forward of our fleet.
Airlines in Asia are driving the majority of growth in order books of the big plane makers and analysts are expecting the market in India to grow significantly during the upcoming decade as millions for just the first time will fly over that period.
Indian airlines such as IndiGo, the largest, and GoAir have ordered hundreds of new aircraft collectively from Airbus.
SpiceJet said a deal was signed for the purchase of 205 airplanes with Boeing, worth approximately $22 billion at Boeing’s list price, but the announcement also included 55 jets that were announced previously in a deal made in 2014 and the possible follow up order of at least 50 more.
On Thursday, one reliable source said that SpiceJet was ready to announce an order for up to 100 planes.
It was not clear if the new order adds to the previously announced Boeing tally. However, the aircraft maker posted previously an order of 100 MAX 737 jets from a customer that was no indentified that represented part of its tally for 2016.
SpiceJet, which currently has a fleet of 40 planes, will begin receiving its first new aircraft in the 2018 third quarter, said Boeing’s Asia Pacific & India SVP Dinesh Keskar.
The discount air carrier likely received a big discount from Boeing’s list prices, which is common with orders of substantial aircraft.
Singh said he is weighing a number of options for the financing of the new order, including sale and leasebacks, but he did rule out the issuing of additional debt to cover the payment of the new planes.
SpiceJet was forced for a brief period to ground its entire fleet during the latter part of 2014 when its cash flow stopped. It currently has approximately 13% of the air passenger market in India, which is fourth overall in the country behind IndiGo, Jet Airways and Air India.
Get Analysts' Upgrades and Downgrades Daily - Enter your email address below to receive a concise daily summary of analysts' upgrades, downgrades and new coverage with MarketBeat.com's FREE daily email newsletter.