Indian low-cost airline SpiceJet said Friday (13) it would buy up to 205 Boeing planes worth $22 billion (£18 billion) as it seeks to increase its share of the world’s fastest-growing passenger aviation market.
SpiceJet, which currently has just 49 planes, said the order would enable it to boost its domestic operations and potentially expand into long-haul international flights.
India’s aviation market is growing at double the pace of China’s, as an emerging middle-class takes to the skies.
“This is the largest deal for SpiceJet, it’s one of the largest in Indian aviation and is the largest for Boeing in India,” SpiceJet Chairman Ajay Singh told journalists as he announced the deal.
“We are now in a very good position to expand our network and operations, which includes both domestic and international routes and destinations.”
The deal marks a major turnaround for SpiceJet, whose planes were briefly grounded in 2014 after suppliers refused to refuel them due to unpaid bills.
It has a 13-percent share of the Indian market, behind rivals Indigo, Jet Airways and Air India.
– Vast potential –
The Indian market is seen as having vast untapped potential with fewer than 100 million of India’s 1.2 billion citizens flying on domestic routes last year.
Train travel remains slow and demand for low-cost flights has boomed in the past decade.
The latest industry figures from the International Air Transport Association show India’s domestic air traffic grew 22.3 percent year-on-year in November, followed by Russia at 15.5 percent and China at 14.9 percent.
But most of the country’s airlines are still loss-making and laden with debt, while state carrier Air India has long relied on government support.
Analysts say lower fuel prices and a rise in economic growth have boosted the sector, with domestic traffic up 21 percent last year.
“The airline has done really well from being almost on the brink of closure to nearly seven quarters of profit,” said industry analyst Kapil Kaul.
“The new aircraft order is on expected lines and gives them long-term direction. A positive and long-term story is likely to emerge with this order.”
SpiceJet, the only Indian low-cost carrier with a Boeing fleet, said the first of the new planes would arrive in early 2018.
It currently has just 49 aircraft, putting it well behind the market leader Indigo, India’s only consistently profitable carrier, with 400.
Singh said the deal included 100 737 jets from Boeing’s new Max family of aircraft, which he said would help reduce fuel costs by up to a fifth.
It also includes the option to buy 50 wide-body aircrafts suitable for long-haul flights. The airline currently only flies short-haul international routes.
SpiceJet put the value of the planes at $22 billion (£18 billion) at list prices, although it will likely pay less as discounts for large orders are customary.
The company’s shares have more than tripled since December 2014.
The deal is a boost for Boeing in India, where rival manufacturer Airbus has traditionally dominated.
“India needs 1,850 planes worth $265 billion (£217 billion) in the next 20 years,” said Boeing India President Dinesh Keskar.
“We do expect more orders out of India.”