IndiGo to buy 50 ATR planes worth $1.3 billion

The Dollar Business Bureau

IndiGo, India’s biggest airlines has decided to break its practice of maintaining a single type of aircraft fleet by entering into an agreement with Avions de Transport Regional (ATR) to buy nearly 50 72-600 ATR aircraft worth $1.3 billion.

IndiGo is India’s budget carrier and has plans to tap into the recently announced government flying scheme UDAN (Ude Desh ka Aam Naagrik) . Though the carrier has never operated any other aircraft other than the fleet of Airbus 320’s, since it started operations in India, the marked diversion to buy 50 ATR’s, despite the company’s net profit dipping 25% proves the airlines willingness to participate and gain a major portion of the underserved  and unserved little known airports in India into its flying territory.

The PM had launched the UDAN scheme last month, with an intention to subsidise 50% of the seats available on flights operating from smaller airports, which would in turn increase the number of passengers flying as the tickets would be priced at marginal or low rates. IndiGo President and Whole Time Director Aditya Ghosh said that in support of UDAN mission, "we are embarking on a journey to build a nationwide regional network and connect cities that have not benefited from the growth in Indian aviation".

As revealed to the media the type of aircraft that Indigo is purchasing is the 72-600 plane which is powered by Pratt & Whitney engine and would have 68-78 seats.

The largest domestic airline in terms of market share, IndiGo would be only the third scheduled carrier after Air India and Jet Airways to have ATR planes in its fleet. As per the term sheet signed between the two companies IndiGo has ‘the flexibility to reduce the number of aircraft deliveries based on certain conditions.’ The term sheet is subject to reaching a mutually satisfactory final purchase agreement with ATR and the engine manufacturer, the airline said. "Assuming that both the intended final purchase agreement are reached, IndiGo plans to launch its turbo-prop operation at the end of calendar 2017 and expects to induct up to 20 ATR aircraft by December 2018," it added. The French company said the deal is "valued at over $1.3 billion at list price". At current foreign exchange rate, $1.3 billion translates to more than Rs 8,400 crore.

"Assuming we reach a final agreement with ATR, we expect to have up to 7 ATR-72-600 aircraft by March 2018," IndiGo said in its release. About the airline's ATR strategy, a senior official said the synergies of having Airbus as well as ATR fleet would be captured even as he indicated that there would be separate operations. Having separate operations would allow the airline to ensure that "complexity does not creep into either of the two operations (Airbus and ATR)", the official said.

Aviation think tank CAPA said that while the ATR order is not surprising, it is possible to see this operating under a separate subsidiary.

The country's domestic aviation market has been witnessing robust growth and sees close to 100 million passengers. IndiGo expects to become the world's third largest market by 2020.

The second round of bidding under UDAN is expected in three months while in the first round, five airlines won bids to operate on 128 routes connecting 70 airports.

At present, Jet Airways and Air India are the only scheduled domestic carriers that operate ATR aircraft.