IndiGo's $26-billion, 250-plane order is biggest ever for Airbus

Written by fe Bureau | New Delhi | Updated: Oct 16 2014, 15:55pm hrs
IndigoIndigo has already taken deliveries of 99 A320s and is currently operating 83 such aircraft on domestic and international routes. (Reuters)
IndiGo on Wednesday announced an agreement with Frances Airbus Group to buy 250 A320neo (new engine option) single-aisle aircraft in the largest ever single order deal for Airbus. At current prices of $102.8 million per aircraft, the value of the order is close to $26 billion, excluding discounts.

The Rahul Bhatia and Rakesh Gangwal co-promoted IndiGo has placed orders for 280 aircraft from the Airbus A320 family since it started operations in 2006. The airline has already taken deliveries of 99 A320s and is currently operating 83 such aircraft on domestic and international routes.

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Aditya Ghosh, president, IndiGo, told FE that the deliveries from the new order will start from 2018 and continue till 2026. The size of the order should be between $25 billion and $26 billion depending on exchange rates at the time of payment. This new order reaffirms IndiGos commitment to the long-term development of affordable air transportation in India and overseas, he said.

IndiGo primarily operates a sale-and-lease-back model, wherein it sells new aircraft to financiers/banks immediately upon delivery and leases it back from them. This helps remove high loan obligations from its books. The airline maintains a young fleet by returning aircraft back to the lessor after about six years 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-SIAs Vistara, all use aircraft from the A320 family.

IndiGo recently converted a part of its previous A320 order to 20 A321s these are part of the same A320 family but with additional capacity for 40 more passengers over the A320s 180 seats.

New Delhi-based InterGlobe Aviation, which operates IndiGo, 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 by accumulated losses of R49,000 crore because of high operating costs and low margins, IndiGo is one of only two domestic airlines to report profits, the other being the much smaller GoAir. In FY14, IndiGos profit fell 60% to Rs 317 crore. In FY13, it had posted record earnings of Rs 787 crore.