Jet cancels orders for 17 Boeing 737s

Last Updated: Tue, Apr 15, 2014 13:54 hrs

Naresh Goyal-promoted Jet Airways has cancelled an order for 17 mid-range Boeing 737s it had placed in January 2012.

According to Boeing's website, the list price of a Boeing 737-800 aircraft in 2013 was $ 90.5 million. As per the 2013 list price, the deal is estimated to be valued at around $ 1.5 billion.

Interestingly the cancellation of the order for 17 Boeing 737-800 comes after the airline inked a purchase agreement with Boeing for 50 737 MAX in August last year.

However, though budget carrier SpiceJet announced its order for 42 Boeing737-8 MAX for $ 4.4 billion at the air show in Hyderbad in March this year, Jet Airways is yet to make an official announcement of its order.

Sources in the know told Business Standard, that Jet Airways cancelled the order a couple of days back when the aircraft manufacturer asked the airline to make pre-delivery payments (PDP) for executing the order.

According to prevalent market practice, airlines are not required to deposit any money at the time of placement of order but are required to make PDP of around 15% of the deal value prior to the manufacturer executing the order.

Jet Airways, the source informed, has cancelled the order due to financing problems.The airline is also learnt to have deferred an order for 10 Boeing 787 Dreamliners.

In May 2013, the airline's vice-president of commercial strategy KG Vishwanath told analysts in a conference call that Jet Airways planned to take delivery of the Dreamliners starting 2015 to expand international operations.Jet Airways did not respond to a detailed questionnaire mailed on April 11.

Boeing said in an emailed response, "We do not discuss our customers' fleet decisions."

The airline's plan to defer purchase of the ten 787s, in the meantime informed industry sources, may hold up plans to expand network on long-haul international routes. Jet Airways will utilize its fleet of Boeing 737s to feed traffic to Abu Dhabi.

The country's second largest passenger carrier has drawn out a blueprint to connect 23 smaller cities within India to Abu Dhabi to synergise operations with Etihad Airways.

According to the commercial co-operation agreement inked with Etihad Airways, the Indian airline has plans develop Abu Dhabi as an exclusive hub for flights to North America, South America, Africa and the United Arab Emirates (exclusive territories).

Canada too would be included in the list of 'exclusive territories' once relevant amendments are made to bilateral air services agreements to permit Jet Airways to fly to Toronto via Abu Dhabi. Jet Airways currently flies to New York and Toronto via its hub in Brussels.

The agreement, however, says exceptions can be made allowing Jet to continue non-stop operations between India and destinations in the 'Exclusive Territories' if Etihad agrees that it would be economically viable to do so. Jet Airways currently has a fleet of 100 aircraft, according to the company's website. These include 59 737s.

More from Sify: