INDIA: Indian Airline IndiGo Confirms $26.6-billion Order To Buy 250 Airbus Planes

IndiGo, India’s biggest airline, firmed up an order to buy as many as 250 Airbus Group SE A320neo single– aisle jets, giving the European planemaker its biggest ever order by number of aircraft.

With the order, Airbus has a backlog for more than 4,100 A320neo planes, the company said in an e-mailed statement Monday. The contract, coming after an initial commitment signed last year, could be valued at as much as $26.6-billion based on list prices, before customary discounts.

IndiGo’s move underscores growth plans for the decade-old budget carrier, which has a 38 per cent share of the local market. The purchase is in line with the ambitious plans of other Asian budget carriers, who are expanding to serve a burgeoning middle class in a fast-growing aviation market.

India and China are among the fastest-growing markets for Airbus and rival planemaker Boeing Co., as both forecast Asia to overtake the U.S. as the world’s biggest plane market in two decades. India will require 1,290 new aircraft valued at $190-billion in the 20 years to 2032 to meet travel demand in the country, the European planemaker said in March, 2014.

“There’s an old saying that more people travel by train in India on any given day than those traveling on airplanes in one year,” Kiran Rao, director of strategy at Airbus, said in an interview, “That’s probably wearing thin but there’s still tremendous room for growth.”

IPO Plans

In January 2011, IndiGo ordered 180 planes worth $15-billion from Airbus, at the time the biggest order in commercial aviation history, as it builds toward its goal of a 1,000-jet fleet. The carrier has taken delivery of more than 100 planes from that order so far.

IndiGo is owned by InterGlobe Enterprises Ltd., which has its origins in a travel company founded by Kapil Bhatia in 1964. IndiGo began service in 2006, a year after placing a $6-billion order for 100 Airbus A320 planes. The carrier uses the “sale– and-leaseback” model, in which it sells jets to lessors, flies them for six years and then hands them in so the fleet remains fresh.

Unveiled in 2010, the A320neo features new engines and has become the fastest-selling jetliner in history.

IndiGo is facing fresh competition after the Indian ventures of AirAsia and Singapore Airlines started operations last year, jumping into a market where profit has proven elusive. Jet Airways India Ltd. and SpiceJet Ltd. have posted annual losses, while Kingfisher Airlines Ltd., saddled with $1.4-billion in debt, has been grounded since 2012.

Market Share

IndiGo probably had a profit of $150-million to $175-million in the fiscal year that ended March 31, according to estimates by CAPA Centre for Aviation. The airline’s domestic market share will probably exceed 40 per cent in the current fiscal year, CAPA’s Indian unit predicts.

InterGlobe Aviation Ltd., owner of IndiGo, plans to raise about $500-million from an initial public offering, people with knowledge of the matter have said. The IPO would value IndiGo at $4-billion, six and a half times the market value of its nearest competitor, Jet Airways India, and 18 times that of SpiceJet.