IndiGo announces largest ever Airbus order; to spend $26 bn for 250 A320s

Written by fe Bureau | New Delhi | Updated: Oct 16 2014, 15:55pm hrs
Indigo Airbus A-320 NeoIndiGo places largest global order for 250 A-320 neo aircraft with European manufacturer Airbus. (Image: Indigo)
IndiGo, India's largest carrier by market share, on Wednesday announced that it has signed an agreement with France's Airbus Group NV to buy 250 A320neo (new engine option) single-aisle aircraft. The deal, which is the largest-ever single order for Airbus, is potentially worth almost $26 billion at current list prices of $102.8 million per aircraft, without including discounts.

The Rahul Bhatia and Rakesh Gangwal co-promoted IndiGo, which since start of operations in 2006 has placed orders for 280 aircraft from the Airbus A320 family, expects deliveries from the new order to start 2018 onwards. From previous orders, the airline has already taken deliveries of 98 A320s and is currently operating 83 such aircraft on domestic and international routes.

Aditya Ghosh, President, IndiGo said, This new order reaffirms IndiGos commitment to the long-term development of affordable air transportation in India and overseas. The additional aircraft will enable us to continue to bring our low fares and courteous, hassle free service to more customers and markets and will create more job opportunities and growth.

IndiGo primarily operates on a sale and lease back model, where it sells new aircraft to financiers/banks immediately upon delivery and then leases it back from them. This help it to remove the high loan obligations from it books. The airline maintains a young fleet by returning aircraft back to the lessor after a six-year period when maintenance costs typically rise.

The A320neo incorporates innovations like new generation engines and large Sharklet wing-tip devices, which together deliver 15% in fuel savings over the previous variant. The A320 Family is the worlds best-selling single aisle product line with almost 11,000 orders to date and over 6,200 aircraft delivered to 400 customers and operators worldwide. Incidentally, the A320 is the most widely used aircraft in India from Air India to GoAir and even newcomers AirAsia and Tata-SIA's Vistara, all use aircraft from the A320 family.

New Delhi-based IndiGo, or InterGlobe Aviation Ltd, had a 32.6% domestic market share in August 2014. While there have been reports of a possible partnership with overseas airlines like Emirates, the airline is believed to be planning to tap the capital markets with an Initial Public Offering next year to raise about $400 million. At a time when the airline industry is burdened under accumulated losses of Rs 49,000 crore because of high operating costs and low margins, IndiGo is one of the only two domestic airlines to report profits, the other being the much smaller GoAir. In FY14, IndiGo's profits fell 60% to Rs 317 crore. In FY13, it had posted record earnings of Rs 787 crore.