Indian start-up Air Costa to buy 50 E-Jets E2 Embraer aircraft for $2.94 bn

Air Costa on Thursday signed a definitive agreement with Brazilian aircraft manufacturer Embraer to but 50 E-Jets E2 aircraft worth $2.94 billion, both companies announced on the sidelines of the Singapore Airshow.

The order is for a mix of 25 E190-E2s and 25 E195-E2s and has an estimated value of $2.94 billion based on 2014 list prices.

Air Costa will be the first customer of the E-Jet E2 in the Indian market when it takes the first delivery in 2018, Embraer, the world's third largest commercial aircraft manufacturer, said in a statement.

The purchase rights are for an additional 25 E190-E2s and 25 E195-E2s, bringing the total potential order to up to 100 aircraft and can reach $5.88 billion if all are exercised. This transaction raises the total E-Jets E2 orders to 200 firm and 200 options/purchase rights since the launch of the E2 program, in June 2013, Embraer said.

Air Costa is part of Vijayawada, Andhra Pradesh-based LEPL Group, a diversified company with interests in property and infrastructure development. The start-up airline currently flies four E-Jets, including two E170s and two E190s.

"E-Jets have proven their ability to stimulate traffic and sustain airline profitability while providing affordable and comfortable air travel to people in emerging markets like Brazil and China. I see the domestic Indian market developing in a similar way with both the current E-Jets and of course the E2s. I congratulate Air Costa for its vision in seizing the opportunity to bring greater connectivity within India and we are sincerely grateful for the airline's confidence in Embraer," said Paulo Cesar Silva, president and chief executive of Embraer Commercial Aviation.

Air Costa started operations in October last year serving several second-tier cities. Airline executives said they would use the jets to fly routes in secondary and tertiary markets.

The E-Jets E2 aircraft family can seat between 70 and 130 passengers. "Our focus has been the tier-two and tier-three cities in India," Air Costa chief financial officer Vivek Choudhary said.

"Our philosophy is that we believe that 70 per cent of the population, of the huge 1.2 billion population in India, still reside in these non-metros," he added.

Air Costa is currently connecting cities in southern India such as Bangalore, Chennai, Hyderabad and Vijayawada, as well as key secondary cities in the North and Northwest of the country. The airline plans to link underserved markets with more direct flights, increasing frequencies and routes, thus serving growing metropolitan areas, as well as key secondary and tertiary business centres.