IndiGo placed an order for 300 Airbus aircraft – its largest so far – worth an estimated $33 billion to replace old planes in its fleet and operate nonstop flights to long-haul destinations such as London and Tokyo.
The order, one of the biggest for Airbus from a single airline operator, is for a mix of A320neo, A321neo and A321XLR (Extra Long Range) aircraft, Airbus said in a statement on Tuesday.
Officials aware of the plan said a large number would be planes that will provide long-range flying abilities to IndiGo and help it expand overseas. Airbus 321XLR will increase IndiGo’s ability to launch flights to London and Tokyo, they added on condition of anonymity.
IndiGo has previously inducted planes by selling them at a premium and taking the aircraft back on lease.
Yet to Choose Engines
It is not clear whether the saleand-leaseback model applies to IndiGo’s latest order because new accounting standards require provisioning for payments to be made during the leasing tenure, impacting the balance sheet negatively.
The actual deal size may be lower than the estimate of $30-33 billion, which is based on listed prices of the aircraft. Airlines typically pay 15% of the total purchase amount upfront.
IndiGo said it has the flexibility to decide on the number of aircraft types ordered and declined to comment further on the matter. The timeline for the delivery of the aircraft was not indicated.
However, officials said a large part of this order comprises Airbus 321neo planes, indicative of Indi-Go’s international aspirations.
The airline, which has been plagued by shutdowns on some Airbus A320neo aircraft fitted with Pratt & Whitney engines, said it is yet to choose the engines for the new aircraft. “The choice of engine manufacturer for this order will be made at a later date,” Riyaz Peermohamed, chief aircraft acquisition and financing officer of IndiGo, was quoted as saying in the release.
The order is significant also because it was placed as the two founders of the airline feud over the shareholders agreement. It sends a signal to investors that the board and the management of IndiGo are insulated from the wrangling promoters. The differences that have cropped up between promoters Rahul Bhatia and Rakesh Gangwal are being investigated by the market regulator.
The longer range capability of the new planes will give wing to Indi-Go’s medium- and long-haul international flights. The XLR aircraft can fly up to 4,700 nautical miles (about 8,700 km) with 30% lower fuel burn per seat compared with previous generation competitor jets, Airbus said in the release.
IndiGo has at times flown an Airbus 321neo to Istanbul without carrying the baggage of passengers due to payload limitations, a concern that the longer-range aircraft will address. The Airbus 320neos ordered will primarily replace the older Airbus320 aircraft in IndiGo’s fleet. IndiGo currently operates a fleet of 247 aircraft and offers close to 1,500 daily flights connecting 60 domestic and 23 international destinations. The latest deal is in addition to plans to induct 372 planes in the coming years. The carrier has ordered 530 aircraft so far – 100 in 2005, 180 in 2011 and 250 in 2015.
IndiGo is India’s largest airline in terms of seat capacity offered and it flies about 50% of domestic passengers.