Boeing Close to US$10.1 Billion Order From India's SpiceJet
By Anurag Kotoky, Julie Johnsson, Bloomberg News | Jan. 06, 2017
Indian budget airline SpiceJet Ltd. is poised to order at least 92 Boeing Co. 737 jetliners as the carrier plots rapid expansion in the world's fastest growing aerospace market.
The transaction, which would more than double SpiceJet's 40-plane fleet, may be closed within weeks after lengthy talks that pitted Boeing against rival Airbus Group SE, people with direct knowledge of the decision said.
The deal includes firm orders for at least 50 of Boeing's 737 Max, and renegotiated terms for 42 of the single-aisle jets that SpiceJet originally ordered in 2014, said the people, who asked not be identified because the discussions are private. The 92 Max jets would be valued at about US$10.1 billion at current list prices, before the discounts that are customary for large purchases.
The order would be a record for SpiceJet, which was forced to shut down operations for a day two years ago after it ran out of money. Current chairman and co-founder Ajay Singh bailed out the low-cost carrier. The airline may boost the total if final talks yield bigger discounts and favorable maintenance contracts, one person said.
Boeing would gain a stronger toehold in India, where Airbus dominates narrow-body fleets after a string of order victories. IndiGo, Go Airlines India Pvt. and the local unit of AirAsia Bhd. all fly variants of the Airbus A320.
"We expect to complete these negotiations and place the order this financial year," the airline said in an e-mailed statement. A Boeing spokesman declined to comment.
The order would help SpiceJet, India's second-biggest budget carrier, compete with market leader IndiGo, which has ordered hundreds of Airbus jets to tap surging air-travel demand from a fast-growing middle class. While IndiGo controls about 42 percent of a market that has seen local carriers almost double to 11 in the past four years, SpiceJet's share is about 13 percent.
SpiceJet shares rose 4.6 percent on Thursday in Mumbai, paring past year's losses to 23 percent. Boeing shares were little changed at US$158.71 in New York.
India is crucial for Boeing and Airbus, and both offered aggressive discounts to SpiceJet, Bloomberg News reported in July.
Boeing, whose jets dominate the current SpiceJet fleet, has the advantage of close financial ties. As the carrier's financial condition worsened, Boeing provided assistance with payments to help it cope with the situation. That earlier deal, which is still on the manufacturer's books, will now become a part of the new order, the people said. SpiceJet operates a fleet of 26 Boeing 737 jets and 14 Bombardier Q400 turboprops, according to its website.
IndiGo, operated by InterGlobe Aviation Ltd., in 2015 ordered 250 Airbus A320neo jets. That order followed a 2006 deal for 100 A320 planes, and 180 A320neos ordered in 2011. IndiGo has 126 jets in its fleet.
India has been among some of the toughest markets for airlines, with some carriers failing due to fuel taxes, tariffs and low fares. As many as 17 airlines in India have shut down in the past two decades, according to consulting company KPMG and the Associated Chambers of Commerce and Industry of India.
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