Boeing in race to win key 737 Max deal with new Indian budget airline

Discussions are taking place on an Akasa deal for as many as 80 jets, with deliveries expected to start as soon as within seven months

FILE PHOTO: A Boeing 737 MAX 8 sits outside the hangar during a media tour of the Boeing 737 MAX at the Boeing plant in Renton, Washington December 8, 2015. REUTERS/Matt Mills McKnight/File Photo

Boeing is in advanced discussions to sell 737 Max jets to a newly created Indian budget airline, a deal that could give the US plane maker a crucial breakthrough in a major market dominated by European rival Airbus.

The airline, Akasa, which is backed by billionaire investor Rakesh Jhunjhunwala, has also held discussions with Airbus for its best-selling A320neo jets, but that model is not available for delivery until several years down the track, tilting the equation in Boeing’s favour.

The talks are not finalised and could still fall apart, according to reports. Akasa, which is seeking initial approval from India’s aviation ministry, plans to use sale-and-leaseback deals to finance the planes.

This would allow the new airline to receive cash from leasing companies as it takes possession of the aircraft.

Mr Jhunjhunwala’s new airline is looking at operating a fleet of 70 aircraft in four years, the businessman said in a Bloomberg Television interview last month.

An order for 70 Boeing 737 Max-8 aircraft – the most popular model – would be valued at $8.5 billion at sticker prices, although discounts are common in large plane orders. Boeing is expected to offer steeper-than-usual discounts on this deal.

A Boeing representative said it always seeks opportunities and consistently talks with current and potential customers about how it can best support their fleet and operational needs. A representative for Mr Jhunjhunwala did not immediately respond to requests for comment.

Any transaction would give Boeing a firmer foothold in India, until recently the world’s fastest-growing aviation market, where it has outstanding Max orders from only one airline, SpiceJet.

Jet Airways, the only other Indian customer for the 737 Max, collapsed under a pile of debt in 2019, leaving the world’s third-largest domestic market dominated by hundreds of Airbus planes.

The discussions are for a deal of as many as 80 aircraft, with deliveries expected to start as soon as within seven months. Any announcement will depend on Akasa securing regulatory approvals to formally start the airline business.

The 737 Max was grounded in 2019 after two crashes that killed 346 people. Its return has taken longer in the Asia-Pacific region than in other major jurisdictions.

While the US, Europe and most other nations lifted the ban starting late last year after extensive fixes, China, the region’s biggest market, and India have yet to sign off on the plane.

SpiceJet, which had 13 of its 737 Max jets idled, has yet to agree with Boeing on a compensation package, and the airline is not expected to take more deliveries before that.

Delivery slots for planes originally headed to SpiceJet, Jet Airways and other customers who have deferred handovers are now available, giving Boeing a chance to offer aircraft out of schedule, they said.

A representative for SpiceJet did not immediately respond to a request for comment. India’s Business Standard newspaper reported the talks earlier.

Both Boeing and the US Federal Aviation Administration have held discussions with the Indian Directorate General of Civil Aviation, the sector's regulator, about the aircraft’s return to service.

Boeing continues to work with global regulators to safely return the aircraft to the skies, according to a representative who said more than 170 out of 195 global regulators have opened their airspace to the Max.

Akasa itself is an ambitious bet on one of the world’s most difficult aviation markets, where provincial taxes of up to 30 per cent make the cost of jet fuel one of the highest in the world. Intense competition also means airlines are often forced to sell tickets below cost.

Updated: August 11, 2021, 11:55 AM