Jet Airways has finalised an $8.7-billion deal to acquire 75 Boeing 737 MAX planes as the airline plans to launch routes and grow its market share.
The Mumbai-headquartered airline and Boeing signed a purchase contract last week. With the latest deal, Jet Airways will have 150 737 MAX planes on order.
Jet Airways has a fleet of 120 planes, which include a mix of narrow-body Boeing 737s, turbo-prop ATRs and wide-body Airbus A330s and Boeing 777s. The airline has 83 Boeing 737s, which it uses on domestic and short-haul overseas routes.
Over the last few years, the airline's capacity induction had been modest in comparison to its peers, resulting in a decline in its market share. New orders will enable Jet Airways to strengthen its position. As of February 2018, Jet Airways had a domestic market share of 16.6 per cent.
Jet Airways and Boeing did not respond to e-mail queries. However in a late evening notification, the airline informed the stock exchange it has entered into an agreement with Boeing for purchase of 75 Boeing 737 MAX planes.
A single Boeing 737 MAX-8 plane is priced at $ 117.1 million, and Jet Airways' deal for 75 planes could be valued at over $8.7 billion.
Typically, airlines secure large discounts from aircraft manufacturers and the actual purchase cost could be much lower. The airline is expected to finance the acquisition through the sale and lease-back mode. Deliveries from last week’s order are expected from 2020, according to a source.
SpiceJet's contract with Boeing and Bombardier planes includes both confirmed order and purchase rights and options for extra planes
Last month, the airline's chief executive officer Vinay Dube had told reporters the carrier hoped to conclude a deal with one of the aircraft manufacturers by the end of March.At the Dubai air show in November 2015, Jet Airways announced its first order of 75 Boeing 737 MAX planes. The airline's 2015 deal also included an option for 50 extra planes. It is not known if the airline has exercised that option now. The first lot (from the 2015 order), which the airline will receive from June, will largely serve as replacements for planes that will be returned to lessors after the end of lease.
The latest order is also in line with aviation consultancy CAPA's expectations.
“Jet Airways is expected to order 75 narrow-body planes and make a decision on wide-body planes, including the 10 Boeing 787s on order that have been deferred,” CAPA said in its annual outlook in February.
In 2018-19, Jet Airways will be making a net addition of eight 737 planes and all of those will be the MAX variant.
Apart from 20 per cent higher fuel efficiency, the MAX variant, which is Boeing's response to the Airbus A320Neo, has the ability to operate longer flights than the standard 737 planes in service.
The MAX aircraft has a range of around seven hours, compared with 5.5 hours of the Boeing 737s in service in India.
Jet Airways is planning Mumbai-Nairobi and Bengaluru-Hong Kong flights with the 737 MAX planes in its winter schedule, along with capacity expansion on domestic routes.
SpiceJet, which is also a Boeing customer, has 155 737 MAX planes on order and options to acquire another 50. SpiceJet expected its first 737 MAX delivery in August and planned to induct another 14 planes by next March, the airline's chairman, Ajay Singh, told journalists last month.
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