BOC to lease Airbus jets to new Tata-SIA airline: sources

DUBLIN (Reuters) - Singapore-based BOC Aviation looks poised to supply aircraft to India's latest airline as new players jostle to capture growth in Asia's third-biggest economy, two industry sources said.

The move is an important step in plans by Tata Sons and Singapore Airlines to set up a full-service airline to compete for business amid India's crowded low-cost market.

Reuters first reported last week that the new Tata-SIA venture had opted to use Airbus A320 jets in preference to Boeing's 737.

The fleet of 20 planes would initially be sourced from leasing companies, rather than purchased direct from Airbus.

That decision triggered a race for the lucrative mandate between aircraft leasing companies gathering in Dublin for annual industry meetings this week.

Industry sources who asked not to be named said the deal, or a significant part of it, was expected to go to BOC Aviation, the aircraft leasing subsidiary of Bank of China.

BOC Aviation and Airbus declined to comment.

"At this moment all that we can confirm is that Tata-SIA will be taking 20 A320 Airbus aircraft on a lease basis," a spokesman for the airline said by email.

"The leasing company and terms can't be disclosed at the moment as commercial discussions are on and may take a few weeks more."

Planemakers frequently rely on lessors to supply spare capacity and establish their brand with new airlines, hoping to sell future batches of planes directly if the carrier expands.

Leasing companies are often able to supply aircraft from their own speculative inventories at shorter notice than the manufacturers, whose production lines are sold out years ahead.

India is seen as a promising market due to the relatively low proportion of people already flying, but is also one of the world's riskiest due to aggressive price competition.

However, analysts say price-cutting has eased since the collapse of Kingfisher Airlines .

Based on current expectations, Tata-SIA will start flying in the second half of 2014, as will an AirAsia-Tata joint venture in the low-cost market, another Airbus operator.

The two airline launches have extended Airbus's dominance of the Indian market for small passenger jets.

Boeing operator Jet Airways is however still in negotiations to buy around 50 737 jets, industry sources said.

The airline, which has been the subject of speculation about the order for over a year, did not respond to requests for comment. A spokesman for Boeing declined to comment.

Low-cost carrier SpiceJet has meanwhile re-ordered 42 Boeing jets, Reuters reported last week.

(Reporting by Tim Hepher and Devidutta Tripathy; Editing by Mark Potter)