SpiceJet has inked an agreement with U.S. aircraft manufacturer Boeing for purchase of 42 737-MAX 8 aircraft, costing Rs. 26,000 crore ($ 4.4 billion), on the inaugural day of the Hyderabad Air Show-India Aviation 2014.
The budget carrier SpiceJet is a part of the billionaire Kalanithi Maran-run’s Sun Group. SpiceJet is India’s fourth-biggest airline by market share. Boeing is an American Fortune 500 company and is one of the largest global aircraft manufacturers.The billion dollar deal between Boeing (BA.N) and SpiceJet (SPJT.BO) for supply of 42 passenger jets is the biggest-ever deal at an Indian air show. India Aviation 2014 is organised by the Ministry of Civil Aviation jointly with the Federation of Indian Chamber of Commerce and Industry (FICCI).
FICCI, which is among the organizers of the air show, described it as the ‘biggest deal in the aviation history of India’.‘It is a big deal,’ said Dinish Keskar, Boeing senior Vice President (VP) sales (Asia Pacific and India).’ ‘SpiceJet’s mission is to become India’s preferred low-cost airline.’ Keskar added.
Andhra Pradesh Governor, E. Narasimhan, was the chief guest at the event. The event was inaugurated by Ajit Singh, Union Minister for Civil Aviation. Ajit Singh said that allowing 49 per cent Foreign Direct Investment (FDI) into Indian airlines has been the biggest game-changer. Singh added that work on more than 50 low-cost airports had already been initiated by the Airports Authority of India (AAI). He announced that a civil aviation university was being set up.
L. Narayanan, Chief Financial Officer (CFO), Sun Group, told reporters ‘Most of the problems of the airline industry are linked to heavy taxes. Once the Gross Domestic Product (GDP) growth picks up there will be good growth in aviation sector.’
The Centre for Asia Pacific Aviation estimates SpiceJet to post its biggest ever annual loss. SpiceJet has been hit by high fuel costs and a weak local currency.
The first of the Boeing jets will reach SpiceJet in 2018. SpiceJet has till now ordered 90 airplanes directly from Boeing, which includes the 737-800, 737-900ER and now the 737 MAX. The Boeing Next Generation 737 aircraft has been the mainstay of the fleet ever since SpiceJet started operations.
Meanwhile, sources have revealed that Boeing is in talks with Jet Air and Air India for 737 Max jets. Indian airlines, struggling under the weight of costly fuel and a weak rupee, is hoping that new planes and new investments will revive their fortunes.
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