IndiGo to buy 50 ATR planes for $1.3 billion, to enter UDAN market

No-frills airline IndiGo today announced plans to acquire 50 ATR turbo-prop planes, worth $1.3 billion, to enter the regional aviation market with new flights by the year-end.

Eyeing "tremendous growth opportunities in tier 2 and 3 cities," IndiGo is expected to be part of the government's ambitious regional air connectivity scheme UDAN in a "big way"

The ATR 72-600 plane, powered by Pratt & Whitney engine, would have 68-78 seats, as per the France-based plane maker.

Indigo, currently, the country's largest airline in terms of market share, would be the third scheduled carrier after Air India and Jet Airways to have ATR planes in its fleet.

IndiGo has signed a term sheet with Avions de Transport Regional GIE (ATR) for purchasing 50 ATR 72-600 aircraft, the two companies said in separate releases.

IndiGo would have the "flexibility to reduce the number of aircraft deliveries based on certain conditions".

The term sheet is subject to reaching a mutually satisfactory final purchase agreement with ATR and the engine manufacturer, the airline said.

"Assuming that both the intended final purchase agreement are reached, IndiGo plans to launch its turbo-prop operation at the end of calendar 2017 and expects to induct up to 20 ATR aircraft by December 2018," it added.

"We are embarking on a journey to build a nation-wide regional network and connect cities that have not benefitted from the growth in Indian aviation," IndiGo president and whole time director Aditya Ghosh said.

The ATRs' low operating costs would help the airline build a large regional air travel network with reasonable fares, Ghosh said.

UDAN (Ude Desh ka Aam Naagrik) seeks to connect un-served and under-served airport as well as make flying more affordable for the masses.

Announcing the signing of term sheet, ATR said the deal is "valued at over $1.3 billion at list price".

The airline is currently preparing for an ambitious development of its regional footprint, ATR noted.

The country's domestic aviation market has been witnessing robust growth and sees close to 100 million passengers. It is expected to become world's third largest market by 2020, according to ATR.

"IndiGo is one of the most respected, efficient and demanding airline in the world. Today they have selected the ATR 72-600s as the best solution to effectively implement their ambitious plans to build a nationwide regional network," ATR chief executive officer Christian Scherer said.

At the end of March the airline had 131 aircraft from Airbus, including 19 A320 neos. By next March, Indigo expects to have a total of 170 A320 planes.

During a conference call to discuss the latest quarterly results, a senior IndiGo official said there are "tremendous growth opportunities in tier 2 and tier 3 cities".