SpiceJet in talks with Boeing to buy more 737 Max planes: Ajay Singh

Indian low-cost carrier SpiceJet Ltd. is in talks with Boeing Co. to buy more 737 Max aircraft to feed its expansion plans, a deal that could mark a Dubai Airshow coup for the grounded narrow-body.

A sales lull for the Max, idled globally since March, allows SpiceJet to acquire planes at a lower cost, Chairman Ajay Singh said in an interview with Bloomberg TV at the biennial event. He said the carrier is looking to set up a new hub in the Middle East and expand to eastern Europe.

Discussions are taking place and the size of the order hasn’t been determined, Singh said.

The Max, a global workhorse on shorter routes, has seen sales crippled by the crisis triggered by two deadly crashes. At the air show, Boeing executives have focused public comments around getting the plane flying again while mending fences with airline customers and suppliers.

A high-profile sale would be a morale-booster for the stricken program. At the Paris air show in June, Boeing announced a blockbuster deal with British Airways owner IAG SA for 200 Max jets. That helped the U.S. planemaker counter an onslaught of orders for Airbus SE’s rival 320-series narrow-body, including the just-introduced long-distance version, the 321 XLR.

New Hub

Singh expects the Max to be recertified by the Federal Aviation Administration by the end of 2019, and said other regulators would soon follow the U.S., with commercial flights resuming worldwide in the first quarter of 2020. Bloomberg News reported earlier that SpiceJet was in talks with Boeing for Max jets.

SpiceJet is setting up a hub in Ras Al Khaimah in the United Arab Emirates to expand flights from India and connect with Eastern Europe, Singh said. He said long-term growth is intact in the Indian market, and the carrier will need more planes to support the traffic.

SpiceJet is an existing customer of Boeing for its single-aisle fleet. In January 2017, it notched its biggest-ever deal with an order for 100 Max jets, with options for 50 more planes.

With enough cash in hand, SpiceJet may evaluate 'several offers' for stake

SpiceJet Ltd. has received many proposals to buy into the company, and the Indian budget carrier is willing to evaluate an offer only if it’s strategic, its chairman and majority shareholder said.

“SpiceJet has enough cash,” Ajay Singh said in an interview, while attending an industry conference in Seoul. “We have to see if this serves SpiceJet’s long-term interests, and when we come to that determination, we’ll do something. These are typical in a situation when an airline is doing well and the market is as promising as India.”

SpiceJet, which almost shut down in 2014 after running out of cash, scripted a comeback since original co-founder Singh played the white knight. The shares have jumped about 70 per cent this year, hovering near their all-time high, as the grounding of debt-laden Jet Airways India Ltd. let the no-frills carrier increase capacity and market share. SpiceJet is India’s biggest budget airline after InterGlobe Aviation Ltd.’s IndiGo.

This year, SpiceJet is due to receive cash by selling planes to leasing companies, Singh said.

SpiceJet shares rose as much as 7.5 per cent to Rs 156.9 in Mumbai and traded at Rs 153.7, the highest since December 2017, as of 10:06 a.m. local time.

Singh founded SpiceJet in 2004 and sold it six years later to a regional media baron. When the carrier was on the brink of collapse, Singh bought it back and revived the airline by renegotiating contracts with vendors and cutting unprofitable routes.

Crashing oil prices also helped him embark on an ambitious expansion, eventually giving the airline a market value of $1.3 billion.

“Now is probably not the time for a sale of stake for cash,” said Singh, who holds almost 60 per cent of the airline. “We are always happy to hear what’s on offer, but there’s nothing imminent, nothing that we are doing right now.”