Transport Airlines

India’s Low-Cost Carrier SpiceJet Just Bought $4 Billion in Worth of 737s

Jan 08, 2014 4:00 am

Danish Siddiqui  / Reuters

A SpiceJet aircraft taxis on the tarmac after landing at Chhatrapati Shivaji international airport in Mumbai. Danish Siddiqui / Reuters


India’s second largest low-fare airline SpiceJet Ltd. is set to sign a deal to buy 40 Boeing 737 MAX planes worth a combined $4 billion at list price, according to two persons familiar with the development.

SpiceJet has been in talks with Boeing Co. for a long time to buy the planes, one of the persons said. “Now the deal will be finalised shortly,” the person said. The second person confirmed the development.

SpiceJet now flies Boeing 737 planes and the smaller Q400 planes made by Canada-based Bombardier Inc., which it uses to connect small towns with metro cities. In 2012, consulting firm Centre for Asia Pacific Aviation, or Capa, said in a report that SpiceJet was evaluating the option of buying 30 to 40 Boeing MAX planes to expand its fleet.

“We have no comments to offer at this point of time,” a SpiceJet spokesperson said. Mint could not immediately contact executives at Boeing Co. of the US for a comment.

On Tuesday, shares of SpiceJet ended at Rs20.30 a piece on the BSE, up 1.25% from the previous close while the benchmark Sensex fell 0.45% to 20,693.24 points.

SpiceJet, controlled by media baron Kalanithi Maran of Sun TV Network Ltd., currently operates more than 360 daily flights to over 55 airports (45 Indian and 10 international destinations).

SpiceJet uses a new generation fleet of 42 Boeing 737-800/ 900ER aircraft, along with 15 Bombardier Q400 aircraft for connecting Tier II and Tier III cities.

No-frills airlines and rival airlines such as IndiGo and GoAir are all set to replace their narrow-body aircraft with more fuel-efficient planes in 2016, a move that should increase margins, reduce carbon footprint costs and put pressure on other carriers to follow suit to curb rising fuel costs.

The first narrow-body Airbus A320neo plane is to be delivered to IndiGo by Airbus S.A.S. in four years. IndiGo, run by InterGlobe Aviation Pvt. Ltd, had placed orders for 150 A320neos in 2011 and the planes are expected to be delivered between 2016 and 2025.

A320neo planes compete with Boeing’s B737 MAX planes.

The Wadia group promoted low-fare carrier Go Airlines (India) Ltd, which runs GoAir, in June 2012 placed an order for 72 A320neo planes.

MAX and Neo planes are up to 15% more fuel efficient than current narrow-body planes. These savings will directly aid the profitability of airlines, where fuel accounts for 50% of operating costs.

Jet Airways (India) Ltd., India’s second largest airline by passengers carried, is also set to announce a deal to buy 50 Boeing 737 MAX planes worth a total of $5 billion at list price, Mint reported in May 2013. ___

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