SpiceJet signs a new deal with Boeing; will purchase 205 MAX Jets for $22 billion

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New Delhi | Updated: January 13, 2017 1:07:51 PM

This is a major deal and is a reflection of SpiceJet's ambition to expand its market and add new destinations for its passengers.

India is the world's fastest growing aviation market, showing double-digit growth in annual passenger numbers thanks to low prices and rising disposable incomes. (Reuters)(Source: Reuters)

Low budget carrier, SpiceJet has confirmed its deal with Boeing in a bid to expand its market in South Asian countries. The deal was confirmed on Friday morning and can make SpiceJet the owner of up to 205 new 737 MAX jet aircraft for an amount of dollars 22 billion.

This is a positive news for both the parties. The deal could be a major booster of Boeing in the Indian market, who was losing the race to its rival Airbus after it earned record-sized orders with InterGlobe and Indigo and also signed a major deal with GoAir. The company had last year said that fiscal first quarter profit saw a jump and more than doubled for the same quarter in 2015. The figure went up to Rs 149 crore in 2016 from Rs 73 crore in 2015.

This is a major deal and is a reflection of SpiceJet’s ambition to expand its market and add new destinations for its passengers. However, executing such a huge deal is not going to be easy. It will be interesting to see how long this deal takes to be executed and how SpiceJet will fund it.

While talking to CNBC TV 18, Ajay Singh, Chairman and Managing Director of SpiceJet said, “We have many funding options to finance the deal. We are looking at internal approvals and bank loans. We are very comfortable with finance options. “

He also added that the delivery of aircrafts will start in 2018 and will be completed by 2024.

According to Reuters, the deal was in progress since 2014 but was confirmed on Friday morning. Boeing had reportedly posted an order of 100 new MAX jets from an  unidentified source but no confirmation was given on the same.

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SpiceJet, on Thursday had held a long discussion on expanding its fleet. This deal will mark the company’s comeback into the market after facing huge losses for seven quarters. SpiceJet was established in 1994 and was acquired to Ajay Singh in 2004. Major stakes were then acquired by Kalanidhi Maran but were sold back to Ajay Singh in January 2015.

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