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Boeing Wins $22 Billion Plane Order From India’s SpiceJet

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  • Boeing Wins $22 Billion Plane Order From India’s SpiceJet

Boeing Co. won an order for 205 planes from SpiceJet Ltd., marking the biggest expansion plan by the Indian budget carrier that is seeking to claw back market share from leader IndiGo.

The deal, which includes 100 firm 737 Max 8 jets, builds on an existing order for 55 aircraft, SpiceJet said in a statement Friday. The airline also has the option to buy 50 more, including widebodies. All combined, the order is worth $22 billion at list prices, the airline said, before discounts that are customary for large orders.

The order, the largest ever placed by an Indian airline for Boeing aircraft, signals the resurgence of SpiceJet as it competes against IndiGo, which has some 400-odd aircraft pending delivery from Airbus SE and controls the world’s fastest-growing major aviation market with a 42 percent share. For Boeing, it marks the widening of its footprint in the South Asian country, where its European rival dominates narrow-body fleets.

“We spent a considerable amount of time negotiating and finalizing the commercial terms, including maintenance of the aircraft,” Chairman Ajay Singh said in an interview. “It was important for us to get all the commercial terms right.”

Delivery Schedule

The planes are for delivery between next year and 2024, he told reporters separately in New Delhi. The deal adds to the 348 jetliner sales garnered by the Chicago-based planemaker in India.

The purchase commitment comes at a time when both Airbus and Boeing are facing slowing jet sales and the highest level of airplane-delivery deferrals in at least 15 years after a decade-long jetliner shopping spree globally.

SpiceJet’s order includes a previously unfulfilled and renegotiated deal for 42 jets and an earlier undisclosed order for 13 planes. The airline currently operates a fleet of 32 Boeing 737 jets and 17 Bombardier Q400 turboprops, according to the company. It controls 13 percent of a market that has seen local carriers almost double to 11 in the past five years.

SpiceJet shares have more than tripled since December 2014, when it ran out of cash and grounded its fleet for a day after oil companies refused fuel credit. The stock rose 3.5 percent to 66.15 rupees as of 12:38 p.m. in Mumbai, giving the airline a market value of 39.7 billion rupees ($582 million).

The airline was profitable in each of the past seven quarters and had cash and near-cash items totaling 1.97 billion rupees as of Sept. 30, according to data compiled by Bloomberg.

Slowdown Risk

“The bigger concern we believe will be with SpiceJet’s financial backing and the willingness of banks to fund this growth,” Mark D. Martin, founder of Dubai-based Martin Consulting LLC, said by phone. “The bigger concern for aviation in India is on account of the economic slowdown caused by the recent step to demonetize the most popular denominations in use.”

Add to that the rise in fuel prices, the net effect on the cost of travel will be at least 20 percent, he said.

SpiceJet does not need to dilute any equity to pay for the order, Singh said. The carrier has sufficient resources within the company, and has already received interest from lessors and lenders to finance the deal, he said. SpiceJet will expand its international operations after the new planes with a longer range come in.

India, where an emerging middle-class is flying for the first time and passenger traffic is growing at double the pace of nearest rival China, is a crucial market for Boeing and Airbus. In 2015, IndiGo, operated by InterGlobe Aviation Ltd., ordered 250 planes from Airbus valued at $27 billion. That followed a 2006 deal for 100 A320 planes and 180 A320neos in 2011.

The South Asian country 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. Airbus dominates the budget airline market in India, with IndiGo, Go Airlines India Pvt. and the local unit of AirAsia Bhd. all flying its jets.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.

The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.

According to Michael McCarthy, the Chief Market Strategies, CMC Markets, the surged in gold price is a result of the projected drop in dollar value or uncertainty.

He said, “The key factor appears to be the (U.S.) currency.”

As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.

Also, the effectiveness of the vaccines can not be ascertained until wider rollout.

Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.

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Crude Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

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Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.

Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.

While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.

On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”

“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.

Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.

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Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

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Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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