India’s largest domestic airline IndiGo will buy 250 Airbus A320neo planes — the single biggest order of jets from the European planemaker — seeking to widen its lead over rivals burdened with big loans and heavy losses.
IndiGo’s third major purchase in nine years is worth about $25 billion (Rs 1.52 lakh crore), approximately five times the annual budget of the rural job guarantee scheme the Mahatma Gandhi National Rural Employment Guarantee Act. It will start taking delivery of the planes from 2018.
“The additional aircraft will enable us to continue to bring our low fares and courteous, hassle-free service to more customers and markets and will create more job opportunities and growth,” Aditya Ghosh, president, IndiGo, said.
The budget airline, which has a fleet of 83 A320 aircraft operating 540 daily flights across 36 destinations, had ordered 100 Airbus aircraft in 2005 and another 180 in 2011.
Preparing for an initial public offering, Indigo is learnt to have reported its sixth straight annual profit in 2013-14.
The closely held company, co-founded by Rakesh Gangwal and Rahul Bhatia, recorded a net profit of Rs 317 crore in 2013-14, 60% lower than its previous year’s Rs 787 crore, hit by a falling rupee and high jet fuel costs.
Launched in 2006, Indigo is the only profitable airline in the country and commands nearly a third of the domestic aviation market.
Naresh Goyal-promoted Jet Airways logged a seventh straight annual loss of Rs 3,667 crore in 2013-14, while Kalanithi Maran-controlled SpiceJet, another listed carrier, posted its biggest ever net loss of Rs 1,003.24 crore the same year.
State-owned Air India’s accumulated losses exceed Rs 30,000 crore.
In an interview to Mint, Ghosh said “these planes will help us to plan a long-term and sustainable future for our company”.
Mint is a business paper published by HT Media Limited, which also brings out Hindustan Times.
“Primarily, this would be used for our own operations. Of course, some will be used for replacement, but largely, these planes would be used to penetrate under-utilised Indian civil aviation market,” Ghosh said.
Indigo, on an average, takes planes older than six years off the fleet.
The company will fund its latest purchase by bank debt and sale and leaseback— a system in which an owner sells an asset to a leasing firm and, at the same time, leases it back on a long-term basis to retain exclusive possession and use.
This prevents capital from being locked up.