Mumbai, May 10 -- Jet Airways (India) Ltd, which will shortly sell a 24% stake in itself to Etihad Airways PJSC, is set to sign a deal to buy 50 Boeing 737 MAX planes worth a total $5 billion (around Rs. 27,000 crore) at list prices, which would be the single biggest such order by the country's second largest airline by passengers, according to two persons familiar with the development. An airline consultancy said separately that it expects Jet Airways to announce plans to buy more than 100 planes at the Paris Air Show in June, including the 50 Boeing MAX aircraft. The investment from Etihad -$379 million for the stake and another $220 million for other assets-has emboldened loss-making Jet Airways into playing catch-up with other airlines. Rival Indian airlines have placed orders with Airbus SAS for a total 222 Airbus A320neos, 15% more fuel efficient than the regular version of the plane, while the Boeing MAX is 13% fuel efficient compared with the current narrow-body planes.
The stake purchase plan made the Mumbai-based airline the first beneficiary of a policy change last September that allowed foreign airlines to invest in domestic ones. "Boeing MAX will offer 10-12% savings on fuel. As other airlines have already opted for Airbus A320neos, it is natural to opt for MAX. These planes will be used for replacing existing fleet and adding new routes," one of the persons cited above said, requesting anonymity. He added that these planes will be used to connect various Indian cities to international destinations via Abu Dhabi. Jet Airways currently operates a fleet of 115 aircraft, which include 10 Boeing 777-300ERs, 10 Airbus A330-200s, four Airbus A330-300s, 73 Boeing 737s, 17 ATR 72-500s and one ATR 72-600 aircraft. With an average fleet age of 5.45 years, the airline flies to 72 destinations including Abu Dhabi, Bahrain, Bangkok, Brussels, Colombo, Dammam, Dhaka, Doha, Dubai, Hong Kong, Jeddah, Kathmandu, Kuwait, London (Heathrow), Muscat, New York (Newark), Riyadh, Sharjah, Singapore and Toronto. The list price of a Boeing 737 MAX plane is around $100 million, the same as that of an Airbus A320neo. Dinesh A. Keskar, senior vice-president (sales) for Asia-Pacific and India at Boeing Commercial Airplanes, didn't offer any comment. A Jet Airways spokeswoman declined to comment. Meanwhile, in a Thursday note, consulting firm CAPA said Jet Airways had confirmed an order for 50 Boeing 737 MAX aircraft together with 8-10 777-300ERs, which will be announced at the Paris Air Show, scheduled to be held from 17-23 June. "We expect a further order for over 50 A320neos which will be utilized by its low cost subsidiary, JetKonnect. Jet Airways was earlier in negotiations for over a year to acquire 100 A320neos, however it now looks likely that the order will be split across manufacturers. Jet is therefore expected to announce a total order for over 100 aircraft in Paris. The longer term order could be as high as 200, however we expect that it will be announced in phases," CAPA said. Meanwhile, 46 B737-800s from an earlier order are still to be delivered to Jet Airways. "Following the conclusion of the Etihad transaction, Jet Airways is also expected to have the capital to implement a clearer market segmentation strategy, in particular the establishment of a strong hybrid model under the JetKonnect brand," CAPA had said in a February note. The hybrid model involves maintaining JetKonnect as a single low-fare subsidiary and Jet Airways as a full-service airline. Jet Airways has decided to do away with its third brand, JetLite. As a fairly large airline, Jet Airways would be planning its fleet for the next few years, said Mahantesh Sabarad, senior vice-president (equity research) at domestic brokerage Fortune Equity Brokers (India) Ltd. "The average age of Jet Airways' fleet seems to be about seven years currently, implying a replacement's due. The purchase strategy of Jet Airways may involve either ordering directly (from) Boeing or getting their orders through lessors like GECAS (GE Capital Aviation Services) or Aviation Capital Group or others," Sabarad said. The country's largest airline by passengers carried, IndiGo, run by InterGlobe Aviation Ltd, has around 30 Airbus A320s from its 2005 order of 100 planes still to be delivered, of which a few will be used as replacements. From 2016-17, IndiGo will start to take delivery of the first of its 150 A320neos, an order that runs until 2025. "As a launch customer, placing what was at the time the largest civilian order by number of aircraft, IndiGo will have obtained very attractive pricing on its aircraft (as it did when it placed its original 100 aircraft order in 2005), providing it with a competitive cost base. IndiGo is also evaluating the possibility of placing an ATR order to establish a regional subsidiary," CAPA said in its February note. ATRs are small planes with 42-72 seats that are used to fly to secondary cities. IndiGo currently has 65 Airbus A320 aircraft and connects 33 cities with 411 daily flights. IndiGo officials weren't immediately available for comment. India's second largest low-fare airline SpiceJet Ltd has 30 B737-800s on order, with deliveries set to commence next year. CAPA said a further narrow-body order may be finalized shortly after a new investor comes on board. SpiceJet is reported to be in talks with foreign airlines and private equity firms for a potential stake sale. "The B737 MAX is the most likely equipment, particularly as there are no available A320neo delivery slots within the required timeframe. SpiceJet remains undecided on whether to exercise its options for a further 15 Q400s, however CAPA expects that the carrier will increase its regional fleet in due course," CAPA said. SpiceJet officials weren't immediately available for comment. In June 2011, the Wadia group-promoted Go Airlines (India) Ltd, which runs low-fare airline GoAir, placed an order for 72 A320neos. It has 15 A320s. On 13 September, Mint reported that no-frills airlines such as IndiGo and GoAir will start replacing their narrow-body aircraft with more fuel-efficient planes in 2016, a move that should increase margins, reduce carbon footprint costs and put pressure on other airlines to follow suit due to rising fuel costs. Mint had reported in September that the 737 MAX was being evaluated for purchase by at least two Indian airlines. According to the Boeing website, compared with a fleet of 100 of today's most fuel-efficient airplanes, a similar number of 737 MAX aircraft will emit 286,000 fewer tonnes of carbon dioxide and save nearly 91 million kg of fuel per year, which translates into more than $100 million in cost savings. The 737 MAX 8's fuel burn is expected to be 8% per seat less than future competition, according to Boeing. Published by HT Syndication with permission from MINT. For any query with respect to this article or any other content requirement, please contact Editor at [email protected]
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