SpiceJet orders 42 Boeing planes for $4.4 billion

 

 

 

Hyderabad: SpiceJet Ltd, India’s second largest low-fare airline, on Wednesday confirmed that it has placed an order for 42 Boeing B737 Max planes worth $4.4 billion by swapping existing orders of 12 Boeing 737 planes.

“We have swapped 12 existing Boeing B737 Next Generation planes out of total 31 such planes to order 42 Boeing 737 Max planes,” said S.L. Narayanan, group chief financial officer at Sun Group, the parent of SpiceJet.

Narayanan said delivery will start from 2018 and the airline will fund the acquisition by selling and leasing back the planes.

“There is no need (to) arrange immediate pre-delivery payments to Boeing as we have swapped with existing planes,” Narayanan said, without disclosing if SpiceJet got any discount on this massive order.

This is a critical acquisition for SpiceJet as the Max planes have the potential to save the airline at least 14% in fuel costs, said Dinesh Keskar, senior vice-president of Asia Pacific and India sales, Boeing Commercial Airplanes, Boeing Co.

Sanjiv Kapoor, chief operating officer at SpiceJet, said any percentage point saving in terms of fuel costs would be significant for SpiceJet.

Jet fuel account for about half of the operating expenses of an Indian airline.

Mint reported on 7 January that SpiceJet had placed orders to buy at least 40 Boeing 737 Max planes.

With Wednesday’s announcement, SpiceJet has effectively ordered 90 aircraft directly from Boeing, which includes the 737-800, 737-900ER and now the 737 Max planes. Till date, SpiceJet has taken delivery of 31 of these planes.

SpiceJet is open to selling equity to a financial or a strategic investor to fund its growth, Narayanan said.

Media baron Kalanithi Maran bought SpiceJet from private equity investors for about Rs.800 crore in 2010 and has infused fresh equity of about Rs.550 crore over the past four years.

“So, we are open for diluting equity. And we need our industry and airline back into health to make it attractive for investors,” Narayanan said.

Kapoor said SpiceJet
will have a fresh route plan starting 30 March that will result in a 20% increase in productivity.

“This will be a fresh network in terms of routes. For instance, SpiceJet currently does not have a flight to Delhi from Mumbai between 6am to 10.30am. So in this fresh network, we will be deploying our flights in a much better way,” Kapoor said.

“SpiceJet’s confirmation of 42 Boeing 737 MAX sends out a clear message that India needs to add in at least 200 aircraft to fill the vacuum left by airlines which ceased operation and the stable growth seen in the last three years,” said Mark D. Martin, founder and chief executive officer at Martin Consulting Llc.

“Prior to SpiceJet’s new 737 MAX fleet induction, it is imperative for SpiceJet to aggressively restructure itself, improve efficiency and stop its current cost overrun due to high fleet costs seen on the Q400 Bombardier planes which the airline currently operates,” Martin said.

Narayanan said SpiceJet is satisfied with the performance of the 15 Bombardier planes that it uses to connect small cities, and that the airline will “at an appropriate time” confirm its options to buy 15 more of these planes.

Shares of SpiceJet rose about 3% to Rs.14.61 each on BSE on Wednesday, outpacing the Sensex’s 0.2% gain, which ended at 21,856.22 points


md.aquil alam
pgdm 2nd semester
source. live mint