SpiceJet orders 42 Boeing 737 MAX planes in $4.4 bn deal

Indian budget airline SpiceJet has placed an order for 42 Boeing 737 MAX planes in a deal worth $4.4 billion, the companies announced in a joint statement today.

Delivery of the single-aisle planes will begin from 2017 as the cash-strapped SpiceJet seeks to win new customers in the vast but fiercely competitive Indian market.

"The induction of Boeing 737 MAX will further modernise our fleet, improve customer experience, and ensure that we operate the most efficient fleet well into the future," said S L Narayanan, chief financial officer of SpiceJet's parent, the Kananithi Maran-owned Sun Group.

The two companies signed a memorandum of understanding on the deal on Wednesday at the India Aviation Show near Hyderabad.

Narayanan said it was a ''swap deal'' in which the new order was placed 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," he said.

Narayanan said delivery will start from 2018 and the airline will fund the acquisition through sale and leaseback mode. All the 42 aircraft will be powered by engines made by General Electric.  

India's aviation market has been going through tough times in an economy that grew at a decade low of 4.5 per cent last year. But airline companies see tremendous headroom for the market as the number of people taking flights in India is still very low compared with developed markets.

Low-cost carriers, including SpiceJet, IndiGo and Go Air, dominate the Indian skies with a near 65-per cent market share.

In the statement, Boeing senior vice president Dinesh Keskar said the strong fuel efficiencies of the 737 MAX "supports SpiceJet's mission to become India's preferred low-cost airline".

Boeing says the 737 MAX will feature eight per cent lower per-seat operating costs than "the future competition".

Keskar said development of the 737 MAX is on schedule with the first flight slated for 2016 and deliveries to customers to begin in 2017. Boeing has said the 737 MAX has received more than 1,800 orders so far.

With the latest announcement, SpiceJet has ordered 90 aeroplanes directly from Boeing, which includes the 737-800, 737-900ER and now the 737 MAX. To date, SpiceJet has taken delivery of 31 of the Boeing planes.

SpiceJet already operates a fleet of 36 Boeing 737-800s and six Boeing 737-900s apart from 15 Bombardier Q400s. The low-cost carrier announced a Rs171 crore loss in the fiscal 2013-14 third quarter.