comScore
Active Stocks
Fri Sep 29 2023 15:59:14
  1. Tata Steel share price
  2. 129 1.78%
  1. NTPC share price
  2. 245.65 3.3%
  1. Power Grid Corporation Of India share price
  2. 199.85 -0.45%
  1. State Bank Of India share price
  2. 598.7 1.48%
  1. Wipro share price
  2. 406.25 0.11%
Business News/ Companies / Boeing, Airbus duel for $12 billion order from SpiceJet
Back

Boeing, Airbus duel for $12 billion order from SpiceJet

Boeing and Airbus are locked in a battle to supply SpiceJet with as many as 100 planes, and both are offering aggressive discounts

At least eight budget carriers dot the skies of India, where air travel grew more than 20% last year, according to the International Air Transport Association. Photo: Pradeep Gaur/MintPremium
At least eight budget carriers dot the skies of India, where air travel grew more than 20% last year, according to the International Air Transport Association. Photo: Pradeep Gaur/Mint

New Delhi/Farnborough: Two years ago, SpiceJet Ltd was fighting for survival as creditors retreated and oil companies refused to refuel its airliners. Today, the world’s biggest planemakers are wooing the recovering Indian budget carrier for a potential blockbuster order worth about $12 billion.

Boeing Co. and Airbus Group SE are locked in a battle to supply SpiceJet with as many as 100 planes, and both are offering aggressive discounts in negotiations that have intensified in the past few months, according to people with direct knowledge of the talks, who asked not to be identified as the discussions are private.

A win would be key for Boeing, with the US manufacturer lagging behind its European rival in India’s burgeoning budget-airline market, one of the key sources of industry growth globally. Segment leader IndiGo and the local units of Singapore Airlines Ltd and AirAsia Bhd, which fly only Airbus jets, have squeezed Boeing’s prospects in a market where air travel is growing at a pace faster than in China or the US.

“Losing SpiceJet would be a big blow to Boeing," said Amber Dubey, a New Delhi-based consultant heading aerospace at KPMG. SpiceJet chairman Ajay Singh “knows this and hence is perhaps having interesting conversations with both."

Ramping up

The Indian discount airline needs to ramp up its 43-plane fleet quickly to pose a meaningful threat to IndiGo, which controls 38.5% of the market and flies 108 aircraft. IndiGo’s owner, InterGlobe Aviation Ltd, has placed orders for 430 Airbus A320neo planes, with a target to build a 1,000-jet fleet eventually.

A SpiceJet spokesman confirmed that Singh is attending this week’s Farnborough Air Show in the UK, but declined to say whether an order announcement is imminent. Boeing said in an email that it will continue to work with SpiceJet to deliver its fleet needs.

“Airbus enjoys 70 percent market share in India and most Indian carriers are growing their business with us," said Airbus spokesman Justin Dubon. “We’d be delighted to help SpiceJet too."

Bombardier Inc., which is enjoying a revival with its C Series narrow-body jet starting service and winning a benchmark deal with Delta Air Lines Inc., is in a separate race for more than 50 smaller planes that SpiceJet is buying. The Canadian aircraft producer will be competing against Brazil’s Embraer SA and the Avions de Transport Regional, or ATR, joint venture of Airbus and Italy’s Leonardo-Finmeccanica SpA.

At least eight budget carriers dot the skies of India, where air travel grew more than 20% last year, according to the International Air Transport Association. In comparison, passenger traffic in China rose about 10% and less than 5% in the US, IATA said in December.

India also poses risks, with some carriers failing due to fuel taxes, tariffs and low fares. As many as 17 airlines in India have shut down in the past two decades, while accumulated losses of operating airlines have reached 60,000 crore, according to a research paper published in June by consulting company KPMG and the Associated Chambers of Commerce of India.

Profit dip

Liquor baron Vijay Mallya’s Kingfisher Airlines Ltd was the most recent carrier to stop flying in 2012 after defaulting on payments to banks, vendors, airports and staff. SpiceJet was almost about to go down that path in December 2014, when it grounded the fleet for a day after oil companies refused to fuel its planes on credit, before retrenching and bouncing back.

A boom in Asian air travel may provide the bright spot that the planemakers are looking for as last month’s so-called Brexit referendum for the UK to leave the European Union adds to uncertainty clouding the global economy while low fuel prices sap demand for new, more efficient jets. On Monday, the first day of the Farnborough expo, Asian airlines were set to give the biggest boost to both Boeing and Airbus.

China’s Xiamen Airlines signed an agreement to buy 30 Boeing 737 Max 200 planes valued at $3.39 billion at list price. India’s Go Airlines India Pvt. is in talks with Airbus to purchase approximately 70 more A320neos worth $7.5 billion, adding to the 72 ordered two years ago, people familiar with the matter said.

The Indian market can absorb as many as 60 narrow-body aircraft a year, said KPMG’s Dubey, adding that Prime Minister Narendra Modi’s push for regional connectivity will help expand the flier base “significantly."

“Looking at the delivery schedule of existing orders, there’s clearly space for more," Dubey said. Bloomberg

"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Updated: 12 Jul 2016, 03:59 PM IST
Next Story
Recommended For You
Switch to the Mint app for fast and personalized news - Get App