Air Costa places $2.9 bn order for 50 jets with Embraer2 min read . Updated: 13 Feb 2014, 09:01 PM IST
Air Costa has become the first customer of Embraer's E-Jet E2s in the Indian market
Mumbai: Aircraft manufacturer Embraer SA of Brazil on Thursday said it clinched a deal to sell 50 jets to India’s Air Costa, a new passenger airline run by Air Costa Aviation Pvt. Ltd, with potential orders for another 50 jets.
Air Costa placed definite orders for 25 E190-E2s and 25 E195-E2s, which have an estimated value of $2.94 billion based on 2014 list prices.
The airline has the rights to purchase another 50 jets under the deal, Embraer said.
“The purchase rights are for an additional 25 E190-E2s and 25 E195-E2s, bringing the total potential order to up to 100 aircraft and can reach $5.88 billion if all are exercised," Embraer said in a statement.
Air Costa, promoted by Vijayawada-based construction firm LEPL Group, is the first regional airline of south India.
The ministry of civil aviation introduced so-called scheduled operator permits for regional airlines in August 2007 to increase air services to small cities.
Regional airlines are required to operate in the small towns within one of the designated regions—north, south, west, east and the northeast. But they are not allowed to connect to more than one major city, except those licensed to fly in the southern region.
“Regional air services have enormous potential in India, especially the ones connecting tier one, two and three cities," said Ramesh Lingamaneni, executive director of LEPL Group and chairman of Air Costa.
Embraer said Air Costa had become the first customer of its E-Jet E2s in the Indian market and will take delivery of the E190-E2 in 2018. The E195-E2 is scheduled to enter service in 2019. At present, the airline flies four E-Jets: two E170s and two E190s.
“The E2s will give us right-sized seat capacity for us to cater to the future target markets and unit costs that are competitive with larger re-engined single aisle aircraft," Lingamaneni said.
He did not disclose the funding for the aircraft acquisition.
India’s aviation sector is set to see an increase in competition. Tata Sons Ltd has floated two joint ventures to run airlines, one with Singapore Airlines Ltd for a full-service airline and another with Malaysia’s AirAsia Bhd for a low-fare carrier, after the government relaxed foreign direct investment (FDI) rules for the sector. Both the ventures are awaiting regulatory clearances.