Spicejet eyes $10-bn deal with Airbus

Spicejet is weighing an order for at least 100 Airbus SE planes as Boeing grapples with the fallout over its grounded 737 Max.

The budget carrier, a major global customer for the Max, may buy a ‘sizable’ number of Airbus A321LR and XLR jets to accommodate a planned expansion, Spicejet Chairman Ajay Singh said on Tuesday. No decision has been made, he said, and the airline would consider a competing midrange jetliner if Boeing decides to build one.

Airbus has “pushed us hard since the day we started flying Boeing aircraft, and of course with the current problems, they’ve pushed us harder,” Singh said. “They have made us a commercial offer and we are evaluating it.” The discussions with Airbus threaten Boeing with a high-profile defection at a time when the US planemaker is enmeshed in one of the biggest crises in its 103-year history. Spicejet, India’s second-largest airline, has 13 Max jets in its fleet and has committed to buy 205 of the single-aisle workhorses as it expands capacity to handle the nation’s fast-growing demand for air travel.

While Singh didn’t specify the exact size of a potential transaction, he said “any aircraft order that Spicejet places would at least be 100 aircraft.”

An order of that scale could exceed $10 billion based on 2018 sticker prices. Though official prices for the LR and XLR aren’t public, the two jets are longer variants of the A321 family of planes, the cheapest of which start at $118 million each. Spicejet shares rose 3.1 per cent to ~134.45, their highest level in two weeks. The broader S&P Sensex index was down more than 1 per cent. The Max has been grounded worldwide since March after a pair of crashes killed 346 people. After six months, the timing of the return to service remains unclear as regulators conduct assessments of the jet’s airworthiness.

Boeing has told Spicejet that it expects US regulators to re-certify the plane in early November, Singh said. While Indian regulators plan to conduct their own checks, Singh said he hopes Spicejet will begin flying its Max planes again in January. “We look forward to the Max aircraft coming back because that’s where the biggest pain point for Spicejet is currently,” he said. The carrier is in conversations with Boeing about compensation for the costs incurred from the grounding.

Spicejet has taken a number of older 737s while the Max remains on the ground, but those jets are more expensive and less efficient to operate, Singh said.