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In the largest single order for aircraft maker Airbus, budget carrier IndiGo on Wednesday signed an agreement to buy 250 A320neo planes, taking its number of aircraft on order to 430.
The companies did not disclose the deal value. Going by the list price, it could be $25.7 billion, though airlines usually get a discount in such deals. And, the memorandum of understanding between the two will still have to be confirmed.
Before this, IndiGo had made two mega orders for Airbus aircraft — for 100 A320s in 2005, and 180 planes (30 A320s and 150 A320neos) in 2011. The 2011 order, though, was later modified to 180 A320neos. Airbus has said the A320neos, with their new engines and enlarged wing-tip devices, will deliver fuel savings of 15 per cent from day one.
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IndiGo President Aditya Ghosh said the deliveries under the new order would begin from 2018 and overlap with those under the 2011 one.
“This new order reaffirms IndiGo’s commitment to long-term development of affordable air transportation in India and abroad. Additional aircraft will enable us to continue to bring our low fares and hassle-free service to more customers and markets. These will also create more job opportunities and growth,” he added.
Even as its domestic peers, burdened with financial issues, are limiting expansion, IndiGo has been expanding fast; it flies 83 planes at present. By November, the country’s largest carrier — and the only profitable one — will complete induction of 100 planes from its 2005 order (two years ahead of schedule). It will also take 12 planes on lease from Tigerair to stay ahead of competition. The deliveries of A320neo planes under its 2011 order will begin from October next year.
Last month, it signed an agreement with Industrial and Commercial Bank of China for financing of 30 A320neos, valued at $2.6 billion.
“We were expecting IndiGo to also place a smaller order for narrow-bodied aircraft with options to convert to A330neos, besides regional aircraft. In the near term, the carrier is likely to launch operations in other countries through joint ventures; and, it could also make an initial public offering this financial year. This MoU will help it bolster the perception of it as a solid long-term player,”' said Kapil Kaul, chief executive for Indian sub-continent & West Asia, Centre for Asia Pacific Aviation.
Incidentally, the announcement came even as IndiGo’s net profit in 2013-14 fell 60 per cent from a year earlier.
Large orders could enable IndiGo to negotiate for better prices and give it the cost advantage over rivals, say experts. No other Indian airline has placed such big offers. Among peers, GoAir has ordered 72 Airbus A320neos and SpiceJet for 42 Boeing 737 Max. Jet Airways is also planning to buy Boeing 737 Max but has not disclosed the number of aircraft it will place an order for.
AirAsia Malaysia has on order 264 Airbus A320neos, many of which would be leased to AirAsia India from 2016.
IndiGo fact file
Current fleet size - 83 Airbus A320neo
Market share - 32.6%
Daily flights - 534
Net profit (FY 14) - Rs 317 crore
