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Each 737 Max jet carries a list price of roughly $100 million, though such jets usually sell for less than half of their official value with typical market discounts.
Rakesh Jhunjhunwala-backed new airline Akasa is in talks with US aerospace company Boeing for buying up to 100 737 Max aircraft.
Former Jet Airways CEO Vinay Dube and his family members are promoters while ex-IndiGo president Aditya Ghosh is a board member of the airline.
The airline is in negotiation with Boeing and has reached out to the government to recertify the aircraft which has been grounded since 2018 after two crashes killing 349 persons, according to sources in the know.
“The company in its discussion with regulators has said it has made significant progress in negotiations with Boeing to acquire the 737 Max and intends to start operation by early 2022.
"For that purpose, the government needs to recertify the aircraft,” said a person aware of the development.
While most of the European countries and USA have approved the return of the jet, Indian regulators haven’t removed the ban so far.
“We always seek opportunities and talk with current and potential customers about how we can best support their fleet and operational needs,” said a Boeing spokesperson.
Each 737 Max jet carries a list price of roughly $100 million, though such jets usually sell for less than half of their official value with typical market discounts.
Jhunjhunwala, in a television interview, had said the airline was looking to have 70 aircraft within the first five years of its operation.
A narrowbody aircraft with dense seating of more than 185 seats is important to have a low-cost structure.
A person involved with Akasa’s planning said the airline intended to place bulk aircraft orders and scale up to at least 20 aircraft in the first year of operation.
He pointed out that scaling up fast would be crucial as it’s important to have a certain scale in order to compete with incumbent players such as IndiGo.
“Market leadership gives pricing power to control fares which are suitable to the market leader and damaging to a new operator.
"This is an accepted practice across the world and IndiGo will follow it since it has the cash and capacity.
"Hence, scaling up has to be really fast,” the person said.
According to industry sources, Akasa would be able to get a sweeter deal from Boeing considering the manufacturer is desperate to find a buyer in one of the fastest growing markets of the world.
After the shutdown of Jet Airways, Boeing has considerably lost ground to its rival—Airbus--in India.
Only SpiceJet has 205 Boeing aircraft on order.
All other Indian airlines including market leader IndiGo, Vistara, AirAsia India and Go First use the A320 aircraft of Airbus.
A320 competes with 737 Max.
The top management of Boeing is worried about the prospects of SpiceJet which has neither shown any intention to acquire new 737 Max aircraft, nor has it started the maintenance work on the 13 aircraft which are grounded since 2018, sources pointed out.
“Boeing is deeply worried about its only customer in the Indian market which is in a bad financial state.
"In fact, one of the reasons why Indian regulator DGCA hasn’t approved the 737 Max aircraft is because SpiceJet hasn’t shown any interest to restart operation with the aircraft,” a person who is involved in aircraft transactions with Indian airlines said.
Recertification of the aircraft would require up to 100 hours of work on each grounded aircraft and SpiceJet may not be keen on that, the person quoted above said.
Additionally, the airline hasn’t been able to finalise agreements with lessors for sale and leaseback transactions.
A cheaper deal from Boeing may not be the only thing going in Akasa’s favour.
An available pool of crew and engineers would be another plus as many of them were left jobless after Jet’s closure.
Also the fact that SpiceJet has cut salaries and put a large number of crew on leave without pay would benefit Akasa, according to industry watchers.
“In terms of availability of crew, Boeing is the best option as a start up airline will be able to poach them easily from an airline like SpiceJet which is currently not paying its staff,” one of the sources said.
Photograph: Shailesh Andrade/Reuters
