$12 Billion Order from Revived SpiceJet Sets Boeing, Airbus Dueling

The change in business fortunes has been dramatic.

As creditors retreated and oil companies refused to refuel its airliners SpiceJet Ltd. was fighting for survival just a couple of years ago, today the recovering Indian budget carrier is being wooed by the world’s biggest planemakers for a potential blockbuster order worth about $12 billion.

Quoting people with direct knowledge of the talks, Bloomberg reports that both Boeing Co. and Airbus Group SE are offering aggressive discounts in negotiations that have intensified in the past few months as both the companies are locked in a battle to supply SpiceJet with as many as 100 planes.

In India’s burgeoning budget-airline market, one of the key sources of industry growth globally, Boeing has been lagging behind the European rival and a win would be key for the U.S. manufacturer.

In a market where air travel is growing at a pace faster than in China or the U.S., Boeings’ prospects have been squeezed by segment leader IndiGo and the local units of Singapore Airlines Ltd. and AirAsia Bhd., which fly only Airbus jets.

“Losing SpiceJet would be a big blow to Boeing,” said Amber Dubey, a New Delhi-based consultant heading aerospace at KPMG. SpiceJet Chairman Ajay Singh “knows this and hence is perhaps having interesting conversations with both,” he said.

In order to pose a meaningful threat to IndiGo, which controls 38.5 percent of the market and flies 108 aircraft, theIndian discount airline needs to ramp up its 43-plane fleet quickly. With a target to build a 1,000-jet fleet eventually, IndiGo’s owner, InterGlobe Aviation Ltd., has placed orders for 430 Airbus A320neo planes.

While declining to say whether an order announcement is imminent, a SpiceJet spokesman confirmed that Singh is attending this week’s Famborough Air Show in the U.K..

“We will continue to work with them on the fleet needs and look forward to delivering their first 737Max,” Dinesh Keskar, Boeing’s senior vice president for sales, said in an e-mail.

“Airbus enjoys 70 percent market share in India and most Indian carriers are growing their business with us. We’d be delighted to help SpiceJet too,” said Airbus spokesman Justin Dubon.

In a separate race for more than 50 smaller planes that SpiceJet is buying is Bombardier Inc., which is enjoying a revival with its C Series narrow-body jet starting service and winning a benchmark deal with Delta Air Lines Inc.

According to the International Air Transport Association, air travel grew more than 20 percent last year in India and there are at least eight budget carriers dot the skies of the country. IATA said in December that passenger traffic rose by less than 5 percent in the U.S. and in China rose about 10 percent. Some of the carriers in India have failed due to fuel taxes, tariffs and low fares and these are some of the risks of that the market poses.

According to a research paper published in June by consulting company KPMG and the Associated Chambers of Commerce of India, while accumulated losses of operating airlines have reached 600 billion rupees ($8.9 billion), as many as 17 airlines in India have shut down in the past two decades.

(Adapted from Bloomerg)

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