Order comes at a time when airline trying to cut operating costs, especially on fuel.
You would assume most airline companies around the world - and certainly the ones in India – to be bearish on the sector. You would also think saving rather than burning cash will be a priority right now, when most are saddled with distressing financials.
But Jet Airways, India’s largest private airline, has just taken a contrarian bet by exercising an option to buy 17 single-aisle 737-800 planes from Boeing Co, a senior executive at India’s largest airline by market share said on Friday.
“Yes, we have converted an option for 17 jets into a firm order,” said the executive, who declined to disclose the value of the deal for the short-to-medium range planes. The deliveries are to begin from 2013.
“Jet Airways has placed an order for 17 Boeing 737 aircraft,” a Boeing spokesperson also confirmed to media.
At list prices, the contract is worth about $1.4 billion, though customers generally negotiate steep discounts.
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This order comes at a time when Jet is trying to cut operating costs, especially that of jet fuel. Intense competition also hasn’t allowed the carrier to raise fares much to cover those costs. Jet Airways posted a net loss of Rs 714 crore in the quarter ended September 30, 2011, compared to Rs 12 crore in the same period last year. It had made a profit of Rs 10 crore in the same quarter last year. Earnings were also hit by an exceptional forex loss of $52.7 million due to depreciation of the rupee.
Jet has a fleet of 101 planes, including 59 Boeing 737s. In 2007, it had placed an order for 20 Boeing 737s, with an option to buy more. Boeing said the 737 was its best-selling commercial airliner, with 8,800 orders.
The Jet executive said the new planes would be inducted into the fleet over the next one-and-a-half years and used to replace those on lease. Mumbai-based Jet has 43 of 737-800 aircraft. The airline owns about 40 of those planes, with the remainder on lease.
The Indian aviation market is one of the fastest growing, with passenger numbers growing at 19 per cent. Jet carried 16 per cent more passengers in the September quarter. Its revenue grew from Rs 3,067 crore in the second quarter of last year to Rs 3,293 crore during the current quarter.
According to DGCA data for November, Jet Airways and Jetlite have 27 per cent market share. IndiGo is ranked second with 19.8 per cent. Air India carried 17.4 per cent, while Kingfisher’s share dropped to 14 per cent.