Airbus lands biggest-ever order of $ 16 b from IndiGo

Thursday, 13 January 2011 00:01 -     - {{hitsCtrl.values.hits}}

Paris (Reuters): Airbus on Tuesday unveiled what it called the biggest jet order in commercial aviation history with a $15.6 billion deal to sell 180 planes to Indian budget carrier IndiGo, including the first orders for a revamped model.

The deal comes as the European plane-maker tallies its plane orders for 2010, but will not enter the order book in time to decide whether Airbus will come from behind to win another fierce annual battle for most sales against rival Boeing Co.

The provisional order includes 30 classic A320s – Airbus’ best-selling model which carries 150 people on short and medium routes – and 150 upgraded versions of the same aircraft, which Airbus says will offer airlines fuel savings from 2016.

Boeing , the world’s second-largest plane-maker behind Airbus , has expressed doubts over whether airlines want such a model when technology for an all-new airliner, with even better performance, might be available from the end of the decade.

But analysts said the deal signed at Airbus’ headquarters in Toulouse could put pressure on Chicago-based Boeing either to match Airbus’ efforts to rejuvenate part of its portfolio with new engines or get to work on a bolder redesign of its 737.

“It is a pretty strong endorsement,” said aerospace analyst Richard Aboulafia of Teal Group, referring to the “neo” deal.

“I don’t think Boeing’s reliance on 737NG (the current A320 competitor) is going to last as long as they would like.”

The Airbus win could also prove disappointing for Canada’s Bombardier, which has been trying to challenge Airbus and Boeing with a new “CSeries” airliner based on the same Pratt & Whitney engines which will now be available on the A320neo.

“These are the sorts of orders that Bombardier should have been racking up and it shows the power of being a big manufacturer,” Aboulafia said.

Airbus launched the “A320neo” – an upgraded version of its best-selling A320 150-seat workhorse – in December but had not so far won anything more than messages of support from airlines.

The “neo” order will spark a showdown between Pratt & Whitney, a unit of United Technologies, and CFM International, jointly owned by General Electric Co and French group Safran, for a deal to supply engines.

The aircraft comes with a choice of engines from either manufacturer, which will be negotiated with IndiGo later.

Airbus says airlines will benefit from 15 per cent fuel savings by choosing the upgraded “neo” model, which will have state-of-the-art engines and upward-sloping wingtips.

With oil close to $100 a barrel, Airbus is gambling that airlines will be in a hurry to lock in these savings even if it means paying more for the aircraft themselves.

Single-aisle planes are the backbone of most airline fleets and sell for around $80 million at list prices.

Airlines usually win discounts, especially for launch orders, but the “neo” has been marketed at a premium to the basic A320 model due to its lower operating costs.

The A320neo has a list price of $87.8 million compared with $81.4 million for a standard A320.

The deal is also the latest sign of rapid expansion in India’s aviation sector, which boasts close to a dozen carriers and double-digit traffic growth.

Boeing estimates the country will buy 1,150 commercial jets valued at $130 billion over the next 20 years.

IndiGo first hit the headlines by ordering 100 Airbus A320s at the Paris air show in 2005. It said last August it planned to buy 150 more planes over two to three years as it looks to fly international routes.

Owned by InterGlobe Enterprises and industry veteran Rakesh Gangwal, a former chief executive of U.S. Airways, India’s second busiest domestic airline will have completed five years of operation in August, which makes it eligible to fly overseas.

IndiGo operates its aircraft on lease under a system known as sale and leaseback. It has so far taken delivery of 37 A320s.

By 2016 it will have a fleet of about 75 planes and the new aircraft will partly be used to phase out the earlier models, meaning a net increase of some 100 aircraft between now and 2022, a source involved in the transaction said.