China / Business

Boeing believed close to $10b buy from SpiceJet

By Bloomberg (China Daily) Updated: 2017-01-07 06:59

Indian budget airline SpiceJet Ltd is poised to order at least 92 Boeing Co 737 jetliners - as the carrier maps out a rapid expansion in the world's fastest-growing air traffic market.

The transaction, which would more than double SpiceJet's 49-plane fleet, may be closed within weeks, after lengthy talks that pitted Boeing against rival Airbus Group SE, sources with direct knowledge of the decision said.

The deal includes firm orders for at least 50 of Boeing's 737 Max model and renegotiated terms for 42 of the single-aisle jets that SpiceJet originally ordered in 2014, the sources added.

The 92 Max jets would be valued at about $10.1 billion at current list prices, before the discounts that are customary for large purchases.

The order would be a record for SpiceJet, which was forced to shut down operations for a day two years ago after it ran out of money, prompting co-founder Ajay Singh to bail out the low-cost carrier. The airline may boost the total number of planes bought if final talks yield bigger discounts and favorable maintenance contracts, one source said.

Boeing would gain a stronger toehold in India, where Airbus dominates narrow-body fleets after a string of order victories. IndiGo, Go Airlines India Pvt and the local unit of AirAsia Bhd all fly variants of the Airbus A320.

"We expect to complete these negotiations and place the order this financial year," the airline said in an emailed statement. A Boeing spokesman declined to comment.

The order would help SpiceJet, India's second-biggest budget carrier, compete with market leader IndiGo, which has ordered hundreds of Airbus jets to tap surging air-travel demand from a fast-growing middle class.

While IndiGo controls about 42 percent of a market that has seen local carriers almost double to 11 in the past four years, SpiceJet has about 13 percent.

SpiceJet shares extended gains for a third day, rising 2.3 percent to 64.60 rupees (95 cents) as of 9:25 am in Mumbai on Friday, the highest intraday level since Nov 30. Boeing shares were little changed at $158.71 in New York on Thursday.

India is crucial for Boeing and Airbus and both offered aggressive discounts to SpiceJet.

Boeing, whose jets dominate the current SpiceJet fleet, has the advantage of close financial ties. As the carrier's financial condition worsened, Boeing provided assistance with payments to help it cope with the situation. That earlier deal, which is still on the manufacturer's books, will now become a part of the new order, the people said. SpiceJet operates a fleet of 32 Boeing 737 jets and 17 Bombardier Q400 turboprops, according to the company.

 

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