business

SpiceJet, CFM Sign $12.5 Billion Engine, Service Deal

  • Agreement for purchase of LEAP-1B engines and 10-year service
  • Order follows $22 billion order for 155 Boeing aircraft

An event staff walks past an advertisement for SpiceJet Ltd. during an event in Mumbai.

Photographer: Dhiraj Singh/Bloomberg

One of India’s fastest-growing airlines has signed a $12.5 billion deal with CFM International Inc. for engines and a 10-year services contract for an incoming fleet of more than 150 Boeing Co. 737 MAX aircraft.

SpiceJet Ltd. has agreed to buy the LEAP-1B engines and spare engines from CFM, which is a joint venture between France’s Safran Aircraft Engines SAS and General Electric Co.’s GE Aviation, the two companies said in a statement on March 10. The deal also includes a 10-year services contract for maintenance of the CFM engines, which will be billed on an hourly basis, the statement said.

The deal provides engines and maintenance that will underpin SpiceJet’s existing $22 billion order for 155 Boeing aircraft, marking the Indian budget carrier’s biggest expansion plan yet. SpiceJet has been trying to claw back market share from the country’s leading discount airline IndiGo, which is operated by InterGlobe Aviation Ltd.

SpiceJet already deploys CFM engines in its current fleet.

“From what we have seen so far, the LEAP-1B is living up to its promises for efficiency and reliability,” Ajay Singh, SpiceJet’s chairman and managing director, said in a statement.

The deal was announced as French President Emmanuel Macron visited India and met with Prime Minister Narendra Modi.

India Demand

India, one of the world’s fastest-growing aviation markets, needs 1,850 new aircraft worth $265 billion in 20 years, with single-aisle planes making up a bulk of the new deliveries, according to Boeing forecasts.

SpiceJet was forced to shut down for a day in late 2014 when it ran out of money to pay for jet fuel, but has since scripted a turnaround, making regular quarterly profits. Founder Singh rejoined the company, cutting loss-making routes, renegotiating contracts and adopting an aggressive growth plan to compete with IndiGo, one of the world’s biggest customers for Airbus SE.

In 2015, IndiGo ordered 250 planes from Airbus valued at $27 billion. That followed a 2006 deal for 100 A320 planes and 180 A320neos in 2011.

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