India's IndiGo places huge order for 300 Airbus planes

Deal for A320-neo jets has a value of at least $33 billion at list price

An IndiGo Airbus A320 plane at the India Aviation 2016 airshow. The airline has just placed a huge order with Airbus for 300 A320neo aircraft. AFP

Indian budget airline IndiGo has placed an order for 300 Airbus A320neo-family jets worth at least $33 billion (Dh121.2bn) at recent catalogue prices, handing the European plane maker what could be its biggest order from a single company.

The mammoth deal includes Airbus's newest jet, a long-range version of the single-aisle A320neo family called the A321XLR, the country's biggest airline said on Tuesday.

This will take IndiGo's total A320neo family aircraft orders to 730, making it the world's biggest customer for these planes.

"This order is an important milestone, as it reiterates our mission of strengthening air connectivity in India," said Ronojoy Dutta, chief executive of IndiGo.

The deal follows a fierce contest between Airbus and Boeing, which is seeking a new endorsement for its competing 737 Max, grounded following two fatal accidents. A320neo family competes directly with the 737 Max and the European plane maker has a strong grip on the Indian market.

IndiGo's announcement came hours after Reuters first reported the deal.

It also came days after IndiGo's biggest quarterly loss, with the company hurt by issues surrounding engines from a former supplier on A320neo-family jets already in the airline's fleet.

In June, IndiGo dropped its original engine supplier, United Technologies unit Pratt & Whitney, in favour of French-US engine venture CFM by agreeing a record $20 billion deal for more than 600 engines to power Airbus jets already on order.

CFM is jointly owned by France's Safran and General Electric of the United States.

The choice of engine manufacturer for this order will be made at a later date, said Riyaz Peermohamed, IndiGo's chief aircraft acquisition and financing officer.

A new deal for 300 A320neo-family aircraft would be worth $33bn at the most recent list prices, published in 2018, but a deal of this scale would come in well below half that after discounts, according to aircraft valuation experts.

Airbus stopped publishing list prices earlier this year.

In Paris, shares in Airbus rose as much as 1.4 per cent after the expected order was reported.

Many of the latest batch of aircraft are not expected to be delivered until mid-way through next decade, replacing others only just joining the IndiGo fleet.

The airline is known for turning over aircraft quickly to keep its average fleet age low, but such a strategy depends on overall strong demand in the jet market.

IndiGo was among the first carriers to buy the re-engined A320neo in early 2011, in what Airbus at the time called a record single deal involving 180 aircraft. It went on to become one of Airbus's largest customers after a series of orders.

Two years ago, an unrelated US private equity company called Indigo Partners placed a blockbuster order for 430 Airbus jets spread between four airlines.

In 1997, US Airways placed an order for up to 400 Airbus A320 jets including options, but many were not delivered.

IndiGo has expanded rapidly to claim almost half the Indian market as rivals such as bankrupt Jet Airways fall by the wayside. Its closest competitor is budget airline SpiceJet, a Boeing operator.

However its two co-founders, Rakesh Gangwal and Rahul Bhatia, have been embroiled in a dispute about corporate governance of the airline that shows no signs of easing.