Wednesday, January 12, 2011

IndiGo orders 180 Airbus aircraft for $15.6 billion

In the largest deal in civil aviation history, Delhi-based low-cost domestic carrier IndiGo has placed an order for 180 aircraft with European-aircraft maker, Airbus. The deal is valued at $15.6 billion.

The deal will see IndiGo acquire 150 eco-efficient ‘neo' series A-320 aircraft, a model that was launched in December. The remaining orders are for the standard A-320s aircraft. IndiGo already has 37 A-320s in its fleet.

Airbus officials said that the aircraft delivery will take place in a phased manner from 2016 to 2025. Late last year, the airline got ‘in-principle approval' by the Ministry of Civil Aviation for import of aircraft in the future.

Financing not divulged

Declining to go into the financing details for the deal, the airline President, Mr Aditya Ghosh, said that IndiGo will follow the same financing method as was used for purchasing 100 Airbus aircraft, a deal that it concluded in 2005. However, the method has never been made public. The airline will start taking delivery of the new aircraft ordered on Wednesday only after it completes the induction of the first 100 aircraft it had ordered earlier, Mr Ghosh said.

“It is too far out in the future to say whether we will have a fleet of 280 aircraft by 2025. Potentially, we could have a fleet of 280 aircraft, but there is a chance that some aircraft are returned or added to the fleet, hence it's difficult to predict the actual number,” he said.

Commenting on the deal, Dr Kiran Rao, Executive Vice-President, Marketing and Contracts, Airbus, pointed out that this is “the largest number of aircraft ordered in a single transaction in commercial aviation history.

IndiGo will be the first airline to operate the A-320neo in India. It will also be one of the first to launch the new aircraft amongst Asian carriers”. IndiGo is yet to decide on which variety of engines will power the aircraft. “We are looking at an engine of Pratt and Whitney and another by CFM. A decision is expected soon,” Mr Ghosh said.

The induction of A-320neo opens the possibility of the airline reducing airfares in the future. This is because the new aircraft offers a 15 per cent reduction in operating costs. “Fuel constitutes close to 40 per cent of the operating cost of airlines in India. If a carrier can cut its fuel bill, it can easily look at passing on the saving to passengers by offering lower fares,” said an aviation analyst.

IndiGo's promoter, Mr Rahul Bhatia, Group Managing Director of InterGlobe Enterprises, said that fuel-efficient aircraft should help the carrier continue to offer low fares.

The deal is the second aircraft acquisition plan announced by low-cost airlines in India in less than six months.

Late last year, Delhi-based low-cost carrier SpiceJet had ordered 30 Boeing-737 aircraft valued at $2.7 billion.

Source : http://www.thehindubusinessline.com/2011/01/13/stories/2011011353030100.htm

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