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IndiGo in talks for jet engine orders despite aviation gloom: Report

That any airline is negotiating over future aircraft and related parts is a surprise considering how thoroughly the global aviation industry has been demoralised by the pandemic

IndiGo | Aviation sector

Anurag Kotoky | Bloomberg 

indigo, airlines, aviation, flights, air craft
IndiGo is the world’s biggest customer for jets in the A320neo family, with as many as 730 on order

IndiGo, India’s biggest airline, is in talks with Pratt & Whitney and CFM International Inc. for its next batch of jet engine orders, according to people familiar with the matter, a rare sign of dealmaking in a sector that’s been paralyed by the virus pandemic.

The discussions with the rival manufacturers relate to engines that would power about 150 new Airbus SE A320neo jets, the people said, asking not to be identified because the negotiations are private. Talks are preliminary and there’s no timeline on when any agreement may be reached, the people said.

Based on the size of IndiGo’s last engine order -- a $20 billion transaction with CFM that covered 280 planes and was the largest engine order in history -- the new agreement could be worth around $10.7 billion, including service, repair, and maintenance. The pandemic presents a unique opportunity, however, for to potentially bargain with the engine makers, both of which it now counts as suppliers.

A representative for declined to comment. Spokespeople for Pratt & Whitney and CFM didn’t immediately respond to requests for comment.

Operated by InterGlobe Aviation Ltd., is the world’s biggest customer for jets in the A320neo family, with as many as 730 on order.

The airline has yet to decide the engine type for the 300 that would be outstanding.

That any airline is negotiating over future aircraft and related parts is a surprise considering how thoroughly the global aviation industry has been demoralized by the pandemic. India had the world’s fastest-growing aviation market for several years before demand started to falter and Covid-19 shut borders and diminished international travel.

IndiGo, while impacted by border closures and a dearth of international travel like other airlines, is relatively rich, with about $2.4 billion of cash and equivalents as of Sept. 30. Total debt as of that date was $3.5 billion.

Although Pratt, which is owned by Raytheon Technologies Corp, has spent $10 billion to develop a new engine for narrowbody jets, it’s faced delivery delays and multiple issues leading to midair shutdowns. IndiGo decided last year to switch away from its engines, placing a $20 billion order instead with rival CFM, a venture between General Electric Co. and France’s Safran SA.

Airlines around the world have deferred or canceled hundreds of plane orders as demand plummets. Any meaningful recovery is seen as years away and a viable vaccine remains elusive. That has forced both Airbus and US rival Boeing Co. to cut production and thousands of jobs, putting pressure in turn on hundreds of suppliers.

IndiGo plans to trim its fleet size over the next two years, taking new deliveries and returning older jets at an even faster clip, before starting to grow again by 2023, Chief Executive Officer Ronojoy Dutta told analysts during a post-earnings conference call last week. Unlike other carriers, IndiGo hasn’t engaged in any “major renegotiation” with Airbus on new deliveries, Dutta said.

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First Published: Thu, November 05 2020. 17:13 IST