Military

Boeing, Airbus Chase Potentially Huge Order from Indian Airline

A320_AirAsia
Airbus Group NV
One of India’s leading low-cost airlines, SpiceJet, has been talking with both The Boeing Co. (NYSE: BA) and rival Airbus regarding orders that could total more than 100 single-aisle passenger jets in a deal or deals that would be worth more $11 billion at list prices. SpiceJet’s fleet currently includes 18 Boeing 737s–16 of the 737-800 model and 2 of the 737-900 model. The company also has one Airbus A319-100 in its fleet and 14 De Havilland DHC-8 prop-jets.

The prospective order comes less than a year after SpiceJet nearly shut down before being bailed out by the airline’s founder and current chairman, Ajay Singh. According to a report at Bloomberg News, Singh said the order will depend on the “volume level we get a what price,” but the total number will exceed 100 planes. Singh also said that the airline will “bring in some investments at the time of the order” which could be signed by the end of March 2016, the end of SpiceJet’s current fiscal year.

There are a few issues to sort out. Even though Boeing is the current incumbent, Airbus is the sole provider for IndiGo, India’s largest low-cost carrier, as well as for the India-based unit of Singapore Airlines Ltd. and AirAsia India. Buying Airbus jets gives SpiceJet a set of viable customers for its planes if the airline should again fall on hard times.

The increasingly likely shutdown of the U.S. Export-Import Bank means that Boeing would either have to guarantee or even provide the funding for SpiceJet’s order on its own or find another willing lender and guarantor. For an airline that just went through a near-death experience, this could be a challenge.

SpiceJet ordered 42 of Boeing’s yet-to-be-delivered 737 MAX airplanes from Boeing in October 2013, bringing the total number of Boeing planes ordered by the airline to 74. The remaining 32 planes have all been delivered. According to Planespotters.net, of 54 total 737s that passed through SpiceJet’s books 36 are now operated by another entity.

Boeing would like to keep SpiceJet’s business–for obvious reasons– and for equally obvious reasons Airbus would like to steal it. Regardless of whether or not the commitments ever turn into firm orders and get added to the backlog, an order of this size is definitely worth fighting for.

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