Boeing, Airbus vying for Vistara order worth $8.5 bn

06 Feb 2018


Vistara, the joint venture between the Tata Group and Singapore Airlines Ltd, is in talks with Airbus SE and Boeing Co to buy jets worth $8.5 billion as the carrier seeks to tap India's growing middle class, according to a Bloomberg report citing people familiar with the plans.

Vistara, majority owned by the Tata Group, is seeking to buy about 50 narrow-body jets, typically used for shorter routes, and up to 10 wide-bodies, said the people, who asked not to be named for discussing private negotiations. A final decision is likely by June, one of the people said.

A representative for Vistara didn't respond to Bloomberg's requests for comments. An Airbus spokesman said the company's discussions with customers are confidential. A Boeing spokesman declined to comment.

The order is the first of several expected aircraft deals Indian carriers are set to place in the coming months, as carriers expand in the world's fastest growing major aviation market, the report says.

Budget operators IndiGo, run by InterGlobe Aviation Ltd, and SpiceJet Ltd are now exploring the low-cost long-haul model, which would need wide-body aircraft on top of the more than 500 single-aisle jets already on order from them. Jet Airways India Ltd. is also in talks to buy as many as 100 narrow body jets.

At the Singapore Airshow this week, Airbus and Boeing are pitching their new fuel-efficient aircraft amid rising fuel prices. After years of ordering planes, Gulf carriers like Emirates Airline, Qatar Airways Ltd and Etihad Airways PJSC have slowed down, with the focus shifting to Asia.

Asia Pacific is likely to have 3.5 billion passengers by 2036, adding more than double the forecast for North America and Europe combined, according to estimates by the International Air Transport Association. To meet that demand, Boeing estimates carriers will need 16,050 new aircraft valued at $2.5 trillion by 2036.

For Vistara, the new jets would enable expansion to destinations including to New York and London and allow it to utilise yet-untapped bilateral agreements between India and its neighbouring countries. The carrier, 49-per cent owned by Singapore Air, offers premium services in three classes. It wants to bolster its foothold in what will be the world's third-biggest air travel market by 2030.

Competition on the smaller aircraft pits the Airbus A320neo against Boeing's 737Max, the people said. On the larger planes, Airbus's A330neos are vying with Boeing's 787 Dreamliners.

Manufacturing capacity could affect Airbus's prospects for the single-aisle order if the European plane maker could not deliver the planes in time, according to the people. One option under consideration is for Vistara to lease jets from other companies initially, one person said.

Vistara competes with struggling state-owned Air India. Adding planes and routes would allow it to also challenge Emirates Airline, Etihad Airways PJSC and Qatar Airways, which have used their hubs nearby in the Middle East to lure Indians travelling to Europe and North America. The three Gulf carriers combined have about an 18 per cent market share in India.

Tata Group established Vistara in 2015 after an earlier attempt by the two partners in the mid-1990s to forge an airline failed. The full-service carrier plans to use its hub in New Delhi to transfer traffic.

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