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India’s IndiGo places historic order for 300 Airbus planes

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Via Reuters Finance

NEW DELHI/PARIS (Reuters) – Indian budget carrier IndiGo has placed an order for 300 Airbus (AIR.PA) A320neo-family jets worth at least $33 billion at recent catalog prices, handing the European planemaker what could be its biggest ever order from a single carrier.

The mammoth deal includes Airbus’s newest jet, a long-range version of the single-aisle A320neo family called the A321XLR, the country’s biggest airline said in a statement on Tuesday.

This will take IndiGo’s total A320neo family aircraft ordersto 730 making it the world’s biggest customer for these planes.

“This order is an important milestone, as it reiterates our mission of strengthening air connectivity in India,” said Ronojoy Dutta, Chief Executive Officer, IndiGo.

The deal follows a fierce contest between Airbus and Boeing, which is seeking a new endorsement for its competing 737 MAX, grounded following two fatal accidents. Airbus’ A320neo family competes directly with the 737 MAX and the European planemaker has a strong grip on the Indian market. IndiGo’s announcement came hours after Reuters first exclusively reported the deal.

It also came days after IndiGo’s biggest quarterly loss, with the company hurt by issues surrounding engines from a former supplier on A320neo-family jets already in the airline’s fleet.

In June, IndiGo dropped its original engine supplier, UnitedTechnologies (UTX.N) unit Pratt & Whitney, in favor of French-U.S. engine venture CFM by agreeing a record $20 billion deal for more than 600 engines to power Airbus jets already on order.

CFM is jointly owned by France’s Safran (SAF.PA) and GeneralElectric (GE.N) of the United States.

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The choice of engine manufacturer for this order will be made at a later date, said Riyaz Peermohamed, IndiGo’s chief aircraft acquisition and financing officer.

FILE PHOTO: An IndiGo Airlines Airbus A320 aircraft is pictured parked at a gate at Mumbai’s Chhatrapathi Shivaji International Airport February 3, 2013. REUTERS/Vivek Prakash

A new deal for 300 A320neo-family aircraft would be worth$33 billion at the most recent list prices, published in 2018,but a deal of this scale would come in well below half that after discounts, according to aircraft valuation experts.

Airbus stopped publishing list prices earlier this year.

In Paris, shares in Airbus rose as much as 1.4% after Reuters reported the expected order.

RAPID TURNOVER

Many of the latest batch of aircraft are not expected to be delivered until mid-way through next decade, replacing others only just joining the IndiGo fleet.

The carrier is known for turning over aircraft quickly to keep its average fleet age low, but such a strategy depends on overall strong demand in the jet market.

IndiGo was among the first carriers to buy the re-enginedA320neo in early 2011, in what Airbus at the time called a record single deal involving 180 aircraft. It went on to become one of Airbus’s largest customers after a series of orders.

Two years ago, an unrelated U.S. private equity company called Indigo Partners placed a blockbuster order for 430 Airbus jets spread between four airlines.

In 1997, U.S. Airways placed an order for up to 400 AirbusA320 jets including options, but many were not delivered.

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IndiGo has expanded rapidly to claim almost half the Indian market as rivals such as bankrupt Jet Airways fall by the wayside. Its closest competitor is budget carrier SpiceJet Ltd(SPJT.NS), a Boeing operator.

However its two co-founders, Rakesh Gangwal and RahulBhatia, have been embroiled in a dispute about corporate governance of the airline that shows no signs of easing.

Reporting by Aditi Shah and Tim Hepher; Editing by Jason Neely/Jan Harvey/David Evans


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