The deal underlines India's development as major aviation market and comes as a welcome boost to EADS Chief Executive Louis Gallois, who has been pushing expansion into emerging markets.
It also gets an early blow in for Airbus in the annual battle with U.S. rival Boeing
EADS shares hit a three-year high on the news and had risen by 2 percent to 20.5 euros by 4:11 a.m. EST, after earlier rising by as much as six percent.
Indian budget carrier IndiGo's order includes 30 classic A320s -- Airbus's best-selling model which carries 150 people on short and medium routes -- and 150 upgraded versions of the same type of aircraft, called A320neo. IndiGo said it would take delivery of the first aircraft in 2015 and was considering an IPO to finance the purchase.
This is surprisingly positive news for us. It is the first A320neo contract and even the largest contract in history, DZ Bank said in a note.
However the bank, which has a sell recommendation, said investors would remain nervous about profitability in the short term amid European defense cuts and the threat of production delays to the next Airbus plane, the mid-sized A350, which has a similar design to the delayed Boeing 787 Dreamliner.
The deal is the biggest in aviation history by number of planes with more than 100 seats, Airbus said on Tuesday.
This contract fully validates my conviction that EADS is worth having among the top picks for 2011. I believe the stock can still double from here in the next 18 months, one Paris-based trader said.
India's aviation sector, which has close to a dozen carriers, is expanding fast as the booming economy revives the market for air travel. Indian domestic airlines carried roughly 46.8 million passengers through November last year, compared to 230 million in China a year earlier.
IndiGo is the third-largest domestic carrier by market share after less than five years flying. It is owned by InterGlobe Enterprises and industry veteran Rakesh Gangwal, a former chief executive of U.S. Airways.
PROFIT TAKING OFF FROM 2012
Later at the annual EADS news conference Gallois said he expects profit to recover from 2012 after being held back by hedging, program costs and government spending restraint.
Underlying profitability this year will be in the same range as the target for 2010, he said.
Last year, order streams were better than expected and cashflow generation was excellent, though operating profitability was not satisfactory, Gallois said.
Gallois added that the troubled Airbus A380 superjumbo program was out of the woods and reiterated its target to start deliveries of its A350 model in the second half of 2013.
Gallois played down uncertainty over who will succeed him in his politically sensitive post in 2012, saying this wasn't an issue at present. The EADS boss is also likely to be quizzed about progress in a trade dispute with Boeing over mutual allegations of unfair subsidies.
EADS was formed in 2000 from a merger of French, German and Spanish interests in a bid to create a European rival to larger U.S. giants such as Boeing and Lockheed Martin
But it has been rocked by frequent in-fighting over the Franco-German power balance.
Secret U.S. cables leaked by the WikiLeaks website suggested tensions over ownership of sensitive technology had resurfaced inside the company's Astrium space division, which builds the Ariane 5 space rocket.
(Additional reporting by Blaise Robinson; Writing by Alexander Smith; editing by Andrew Callus)