India's SpiceJet buys up to 205 Boeing jets worth $22bn

NEW DELHI: Indian low-cost airline SpiceJet said on Friday it would buy up to 205 Boeing planes worth $22 billion as it seeks to strengthen its grip on the world's fastest-growing passenger aviation market. SpiceJet said the order, the largest an Indian airline has ever placed with the US aerospace giant, would enable it to expand its domestic and international operations.

"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."

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. 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 now has a 13-percent share of the Indian market, behind rivals Indigo, Jet Airways and Air India.

India's airline market is growing at double the pace of nearest rival China, as an emerging middle-class takes to the skies. Train travel remains slow and demand for low-cost flights has boomed in the past decade. The 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. 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 currently has just 49 aircraft, putting it well behind the market leader Indigo with 400. It is the only Indian low-cost carrier with a Boeing fleet. The company's shares have more than tripled since December 2014.

Singh said the deal included an option to purchase wide-body, long-haul aircraft in the future. It put the value of the planes at $22 billion at list prices, although it will likely pay less as discounts for large orders are customary. "We are honoured to be the partner of SpiceJet and to be in India in a big way and this is a demonstration of our commitment to our partners and to India," said Raymond Conner, vice chairman of Boeing.