Forbes India 15th Anniversary Special

SpiceJet places an order for 100 Boeing 737-8 MAX aircraft

The low-cost airline's total aircraft order with Boeing stands at 205, which is valued at about $22 billion

Published: Jan 13, 2017 07:03:38 PM IST
Updated: Jan 13, 2017 07:09:53 PM IST

SpiceJet places an order for 100 Boeing 737-8 MAX aircraft
SpiceJet is India’s fourth largest airline
Image: Punit Paranjpe / Reuters

SpiceJet, India’s fourth largest airline with a market share of 12.7 percent, has placed a firm order for 100 B737-8 MAX aircraft with US-based aircraft manufacturer Boeing. The average list price of a B737-8 MAX is $110 million.

Additionally, SpiceJet has secured purchase rights (an option to purchase aircraft at a pre-determined price) for 50 Boeing aircraft, which would include the 737-8 MAX and some of Boeing’s wide-body aircraft. With this SpiceJet’s total aircraft orders with Boeing adds up to 205, valued at $22 billion. [In the commercial aviation industry, such large orders are executed through a sale-leaseback agreement between the airline and aircraft leasing companies.]

The deal with Boeing is also an affirmation of SpiceJet’s remarkable turnaround story. Led by New Delhi-based industrialist Ajay Singh, SpiceJet flew back into profitability in FY16 reporting a profit of Rs 407 crore, after a gap of four consecutive fiscals. It had last reported a profit of Rs 101.6 crore in FY11.

For the June and September quarters of the ongoing fiscal, SpiceJet reported profits of Rs 149.03 crore and Rs 58.92 crore, respectively. Shares of SpiceJet ended the day at Rs 65.50 apiece, up 2.50 percent over the previous day’s closing price.

“Our turnaround story has been one which has very few parallels in the world today and we are proud of it. SpiceJet has achieved seven consecutive quarters of profit, highest on-time performance and lowest cancellation rates; a record load factor of over 90 percent every month for 20 months in a row – a feat that has no parallel in aviation history,” says Ajay Singh, chairman and managing director, SpiceJet.

“We are now in a very good position to expand our network and operations which includes both domestic and international routes and destinations,” adds Singh.

SpiceJet placed its first order with Boeing in 2005 for the 737 Next-Generation aircraft and currently operates 32 on them. It also operates a fleet of 17 Bombardier Q400s.

“The economics of the 737 MAXs will allow SpiceJet to profitably open new markets, expand connectively within India and beyond, and offer their customers a superior passenger experience,” says Ray Conner, vice chairman, The Boeing Company. According to Boeing, its 737 MAX range of aircraft deliver s 8 percent lower operating costs than its competitors, while the 737 MAX Advanced Technology winglet increases fuel efficiency by 1.8 percent.