IndiGo confirms order to buy 250 Airbus planes worth $26.5 billion

Mumbai: IndiGo, India’s largest domestic airline by passengers carried, on Monday said it has confirmed an order to buy as many as 250 Airbus A320neo single-aisle jets. At the listed price, the order is worth $26.5 billion.

InterGlobe Aviation Ltd, IndiGo’s parent company, had signed a memorandum of understanding (MoU) last year for buying 250 planes made by Airbus SAS. IndiGo, which plans to raise around Rs.2,500 crore in an initial public offering (IPO), had said in its draft red herring prospectus (DRHP) that the MoU signed between aircraft manufacturer Airbus and IndiGo had expired. The DRHP had added that the airline is in discussions with the plane maker to renew the same.

IndiGo has been consistently profitable since 2009, a feat unrivalled by any other domestic airline.

According to IndiGo president Aditya Ghosh, the new order further reaffirms the airline’s commitment to the long-term development of affordable air transportation in India and overseas.

“The additional fuel-efficient A320neo aircraft will enable us to continue to bring our low fares and courteous, hassle-free services to more customers and markets and will create more job opportunities and growth. The IndiGo team is energized and excited to herald this new phase of our growth for many years to come,” said Ghosh in a telephone interview.

The aircraft purchase agreement was signed on the midnight of 15 August, coinciding with India’s 69th independence Day, said Ghosh.

In 2005, IndiGo placed an order for 100 A320s, all of which have been delivered. With Monday’s announcement, IndiGo has ordered 530 aircraft from the A320 family with Airbus. Out of this 530, IndiGo has taken delivery of 100 planes.

“It fills us with pride that IndiGo, India’s largest airline and one of the early launch customers for the A320neo, is coming back for more of our benchmark aircraft. This order confirms the A320 family as the airliner of choice in the most dynamic aviation growth markets,” said John Leahy, Airbus chief operating officer (customers).

The A320neo plane’s “new engine option” incorporates many innovations, including latest generation engines and large sharklet wing-tip devices, which will deliver 15% in fuel savings from day one and 20% by 2020. This is equivalent to a reduction of 5,000 tonnes of CO2 per aircraft per year.

Ghosh said IndiGo will start taking delivery of the newly ordered planes from 2018 till 2026.

“We are nine-years-old and now we are now outlining growth for next 11 years. We have successfully financed 100 planes in the past. So I don’t see any problem in financing the remaining. Also, we have time to arrange funds,” Ghosh said.

IndiGo is India’s largest airline with a market share of 33.8% in domestic passenger volume for fiscal 2015. As of 30 April 2015, the airline offers 593 daily flights connecting 33 airports in India.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.