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Airbus, Boeing Win $3.1 Billion Order From Singapore Air-Tata Venture

Bloomberg logoBloomberg 7/11/2018 Anurag Kotoky
A Vistara aircraft prepares to land at Chhatrapati Shivaji International Airport in Mumbai, India, on Monday, July 10, 2017. India, which was the world’s fastest growing aviation market last year, is crucial for planemakers like Boeing Co. and Airbus SE, as airlines see increased demand from the rising middle class.: Views of Indian Airlines© Bloomberg Views of Indian Airlines

(Bloomberg) -- Airbus SE and Boeing Co. split firm orders for 19 jets from the Indian affiliate of Singapore Airlines Ltd. that is seeking to start international flights and bolster local operations.

Vistara, as the airline is known, will buy 13 of the A320neo and A321neo jets that have a list price starting at about $111 million each and six Boeing 787-9 Dreamliners at about $282 million apiece. The combined order is valued at $3.1 billion, excluding customary discounts, the carrier said in a statement Wednesday.

“This order is very important for Vistara because we always felt that international operations will give us a leverage on further improving our financial performance,” Chief Executive Officer Leslie Thng said in an interview separately. As a full-service model in an “extensively competitive” local market, Vistara is not yet profitable, he said.

Offering premium services in three classes, the airline operates in one of the world’s most expensive aviation markets, where intense competition means fares can be as low as 2 cents despite jet fuel being the costliest in Asia. Still, the allure of the nation of 1.2 billion people has prompted Singapore Air, Etihad Airways PJSC and AirAsia Bhd. to seek local partners and compete against the likes of budget airlines such as IndiGo and SpiceJet Ltd.

Leasing More

Additionally, Vistara will be renting 37 new A320neo family aircraft from leasing companies, according to its statement. The airline currently has a fleet of 21 single-aisle Airbus planes.

Vistara, Jet Airways India Ltd. and Go Air are among Indian carriers boosting orders from Asia as regional operators add routes and swell their fleets to meet travel demand fueled by people flying for the first time. Guillaume Faury, the head of commercial aircraft at Airbus, has said reducing the order backlog of more than 7,100 planes is among the biggest challenges for the European maker as production fails to keep pace.

In late June, Chicago-based Boeing won two orders worth $14.4 billion. Bamboo Airways, a Vietnamese startup, signed a commitment for 20 of its twin-aisle 787-9 Dreamliners, while Vistara’s rival Jet Airways announced it was buying 75 single-aisle 737 Max jets.

CFM, GE Engines

The latest narrow-body A320neo family jets ordered by Vistara will be powered by Leap 1-A engines made by CFM International and will be delivered between 2019 and 2023. The bigger Boeing jets would be handed over in 2020 and 2021, the airline said. The Dreamliners will have General Electric Co.’s GEnx-1B turbines.

India’s largest carrier IndiGo, operated by InterGlobe Aviation Ltd., is the top customer for Airbus’s A320neo jets. Jet Airways and SpiceJet Ltd. both have more than 200 Boeing planes each on order.

Vistara, which is 51 percent owned by local conglomerate Tata Group and offers premium services in three classes, controls just about 4 percent of the local market -- the smallest share among all carriers with a nationwide network. It has said that its second phase of growth will be more aggressive.

Tata and Singapore Airlines will fund the latest plane purchase by Vistara, CEO Thng said. It has sought approvals to fly overseas, and will launch its first international flight in the second half of this year, he said.

The airline, which started operations in 2015, also has options to purchase seven more of the A320neo family aircraft and four more Dreamliners.

(Adds airline CEO’s comments in third paragraph.)

To contact the reporter on this story: Anurag Kotoky in New Delhi at akotoky@bloomberg.net

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Sam Nagarajan

©2018 Bloomberg L.P.

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