India's $85-bn orders still not enough: SpiceJet

Looking at Exim Bank, sale-and-leaseback for funds

India’s airlines have ordered about 850 planes valued at about $85 billion in recent years. SpiceJet, a budget carrier, says that’s still not enough to meet demand.

SpiceJet, which last month ordered as many as 205 Boeing Co jets worth $22 billion, is being rather conservative with its purchases, chairman Ajay Singh told Rishaad Salamat in a Bloomberg Television interview in Singapore on Wednesday. Demand will surge with more Indians starting to fly, fuelled by economic growth in smaller towns, he said.

“With all the orders that all the Indian airlines have placed, counting for replacements, we will have 800 planes in 10 years from now,” Singh said. 

“That’s not a lot of planes. That’s the same number of planes that Southwest Airlines has today.”

India — the world’s fastest growing major aviation market —is among battlegrounds in emerging markets for planemakers like Boeing and Airbus Group SE, as a rising middle class flies for the first time. 

The potential has made Singapore Airlines Ltd and AirAsia Bhd set up local units that are grappling with poor infrastructure, cut-throat fare wars and taxes that make jet fuel the costliest in Asia.

“We have to keep on developing the infrastructure,” Singh said. “A lot of the growth in India is not happening in Mumbai and Delhi, it’s happening in tier-2, tier-3 towns.”

Stoking Demand

Indian Prime Minister Narendra Modi has offered to fund some of the airlines’ losses and to subsidise landing and parking charges if they fly to remote parts of the country as part of a recent policy. Modi has also vowed to cap airfares to stimulate demand in unserved airports, which constitute about 80 percent of the country’s total airports and airstrips.

SpiceJet, which was forced to shut down briefly in 2014 after running out of money, has many options to finance its plane orders, said Singh, an original co-founder who returned to run the carrier again. Those include potential funding by the Export-Import Bank of the US as well as sale-and-leaseback arrangements, he said.

IndiGo, India’s biggest airline, has ordered 430 Airbus A320neo jets on top of a previous order for 100 planes, making it the model’s biggest customer in the world. Go Airlines has ordered 144 of the same model, while Vistara, a joint venture between Tata Sons and Singapore Airlines, said it is looking to order narrow- and wide-body planes.