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Indigo Partners A320neo order gives Frontier, Volaris, Wizz & JetSMART platform to accelerate growth

Analysis

Four ultra-low cost airlines from four distinct markets are planning rapid expansion under an ambitious order placed by LCC specialist equity group Indigo Partners. Indigo signed an MoU at the 15-Nov-2017 Dubai Airshow for 430 A320neo family aircraft which are intended for US-based Frontier Airlines, Hungary-based Wizz Air, Mexico-based Volaris and Chilean start-up JetSMART.

The order from Indigo is intriguing in that Indigo only owns a minority stake in Volaris and Wizz. The deal therefore could be viewed as a combined order from four loosely aligned airlines that are keen to leverage the economies of scale associated with a bulk aircraft order. The "order" is essentially a series of four MoUs between Airbus and each individual airline. In the case of Wizz and Volaris, approval from all of the shareholders is needed. Frontier and JetSMART, by contrast, are wholly owned by Indigo.

Indigo is likely taking advantage of attractive pricing during a down year for aircraft orders. The investment firm appears confident the four airlines can absorb 430 new aircraft, given the strength of their home markets and the ULCC model, but could also eventuate in allocating aircraft to new ULCCs that have not yet been established.

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