India’s IndiGo jets into history with record $15.6b Airbus deal

Airbus parent EAD’s shares hit a three-year high on the news and had risen by two per cent to 20.5 euros by 1111 GMT, after earlier rising by as much as six per cent.

The airline, India’s largest low-cost carrier, will be the launch customer for the European aircraft maker’s energy-efficient, A320 new engine option (neo) series of aircraft. Airline officials signed a memorandum of understanding with Airbus in Toulouse in France for 150 A320neos and 30 standard A320s.

“This order for industry-leading fuel-efficient aircraft will allow IndiGo to continue to offer low fares,” said Rakesh Gangwal, co-founder of the airline and a former chief executive of US Airways. IndiGo is owned by InterGlobe Enterprises and Gangwal.

According to Rahul Bhatia, group managing director of InterGlobe, and the other co-founder of the airline, ordering more A320s was the natural choice to meet India’s growing flying needs. “The opportunity to reduce costs and to further improve our environmental performance through the A320neo was the key to our decision,” he added.

“It is very good news. This order, it is the equivalent of six months of production, of course spread out over several years. This is considerable,” said Airbus Chief Operating Officer Fabrice Bregier. “It is a great present for the start of the year,” he added.

The five-year-old carrier, which recently overtook Air India as the third-largest domestic airline in India (after Jet Airways and Kingfisher), plans to go international later this year, launching flights to the Gulf and South East Asia.

Even before it launched its operations, as a start-up IndiGo astounded the civil aviation world in 2005 when it placed an order for 100 A320s worth $6 billion. Airbus has already delivered 37 of the aircraft, funded by the airline through loans and leases.

According to airline executives, the company might come out with an initial public offering (IPO) to help it fund its new acquisitions. IndiGo is expected to take delivery of the A320neos between 2016 and 2025, and has still not selected the engine for the aircraft. IndiGo currently operates nearly 225 flights daily to two-dozen cities in India.

Airbus has still to launch the new version of its popular A320s, which are priced at an estimated $88 million apiece (about $6 million more than the existing models). The A320neo is a 220-seater, short-to-medium range, narrow-body aircraft that offers 15 per cent fuel savings — on existing models — besides offering an additional 950km of range.

The Indian civil aviation industry is one of the fastest-growing in the world. According to American aircraft-maker Boeing, India’s carriers will acquire over 1,150 commercial aircraft, worth over $130 billion in the next 20 years. The Centre for Asia Pacific Aviation (CAPA) feels this is a highly conservative figure; it estimates the value could top $250 billion.

There are about 400 commercial aircraft operating in India and the numbers are expected to grow rapidly over the coming years. In 2010, domestic airlines flew nearly 50 million passengers in the country.

nithin@khaleejtimes.com