x Abu Dhabi, UAEFriday 19 January 2018

IndiGo makes $15bn Airbus order to meet rising demand

Indigo, India's largest no-frills airline, has placed the largest order in aviation history with a purchase worth $15.6 billion for 180 single-isle planes.

Aditya Ghosh, the president of IndiGo, says the company plans to use new aircraft to meet rising demand from India's middle class. Namas Bhojani / Bloomberg
Aditya Ghosh, the president of IndiGo, says the company plans to use new aircraft to meet rising demand from India's middle class. Namas Bhojani / Bloomberg

MUMBAI // Airbus has won the biggest single-company order in aviation history.

The deal, worth US$15.6 billion (Dh57.3bn), is for the delivery of 180 single-aisle aircraft to IndiGo, India's largest budget airline.

Airbus will begin deliveries of the aircraft in 2015 after it completes a previous order for 100 aeroplanes placed by the same airline in 2005.

According to Airbus, the previous biggest order was for 150 planes from China Aviation Supplies Import & Export Group Corporation in 2006. The UK's EasyJet placed an order for 120 planes in 2002 and US Airways ordered 124 planes in 1997.

Aditya Ghosh, the president of IndiGo, said the airline planned to use the additional capacity to expand domestic routes to take advantage of the "soaring demand" for air travel from India's middle class. The airline currently operates 34 aircraft.

IndiGo also plans to launch international routes to the Middle East and South East Asia this year, five years after it entered the aviation business,which makes it eligible according to government regulations to fly overseas.

The record order includes 30 classic A320s, Airbus's standard aircraft for 150 passengers, which is its best-selling model, and 150 upgraded fuel-efficient versions of the same aircraft called the A320neo.

"This order for industry-leading, fuel-efficient aircraft will allow IndiGo to continue to offer low fares," said Rakesh Gangwal and Rahul Bhatia, the co-founders of IndiGo. "Ordering more A320s was the natural choice to meet India's growing flying needs."

The huge order, announced at Airbus's headquarters in Toulouse, France, is seen by industry experts as a sign of India's booming aviation industry, currently expanding at breakneck speed to accommodate soaring passenger demand.

According to government forecasts, domestic passenger numbers are expected to jump fourfold to 180 million by 2020. Boeing estimates the sector will require 1,150 commercial jets worth $135bn by 2030.

"India's airline industry is in expansion mode," said Harsh Vardhan, the chairman of Starair Consulting, an aviation consultancy in New Delhi. "The demand-supply gap needs to be filled, and the only way to do it is by acquiring new aircraft."

IndiGo is owned jointly by InterGlobe Enterprises and Mr Gangwal, who is a former president and chief executive of US Airways. The airline is one of the biggest domestic carriers in India.

In November, it trumped the national carrier, Air India, to become the third largest-airline, with a market share of more than 18 per cent.

Mr Ghosh said the airline was considering sale-and-leaseback deals and debt issuances to finance the record order. An initial public offering later this year is also being considered. IndiGo, he said, was keeping "all its options open".

Last year, the airline submitted a proposal to India's aviation ministry, seeking permission to start operating on 15 international routes this year, including service to Dubai, Abu Dhabi and Sharjah.

The Middle East market figures prominently in IndiGo's expansion plans, he said, especially given that 6 million Indian nationals make up the largest expatriate community in GCC countries. Of these, and estimated 1.2 million are in the UAE.

IndiGo expects to operate most of its flights to the region from southern Indian cities such as Kozhikode, Kochi and Thiruvananthapuram.

Mr Ghosh declined to disclose whether the airline was considering code-sharing tie-ups or alliances with other carriers based in the Middle East.