Hyderabad: Union civil aviation minister Praful Patel has said 2010 may be a year of recovery for India’s aviation sector.
Air show disaster: A building was severely damaged after a Surya Kiran aircraft of the Indian Navy crashed into it during aerobatics at the Hyderabad air show on Wednesday. The pilot and the co-pilot were killed, while a few people on the ground were injured. Bharath Sai / Mint.
Patel, speaking at the inauguration of the second India Aviation international exhibition in Hyderabad on Wednesday, based his optimism on the 18% compounded annual growth rate (CAGR) the sector showed in 2009 despite the global slowdown.
“We have been able to weather the thunderstorm that struck the world with composure, and I am looking at 2010 with cautious optimism and am hopeful that the worst will be over this year,” Patel said.
Patel’s not alone in his optimism. Though the sector has not seen a significant improvement in its operating environment, airlines and plane makers are upbeat because of the reviving economy—which they say could lead to more people travelling by air.
India’s economy is forecast to expand by 8.2% in 2010-11, faster than the projected 7.5% rise in 2009-10 and 6.7% in the previous fiscal.
The country’s largest low-fare airline IndiGo, run by InterGlobe Aviation Pvt. Ltd, now wants to induct 10 planes in 2010-11 instead of the six it had originally planned.
Aditya Ghosh, president of IndiGo, said his airline would also hire 1,000 people in 2010.
Kiran Rao, executive vice-president, marketing and contracts, of European plane maker Airbus SAS, projects India’s passenger plane market will grow at least 12% in 2010. “This is more than enough.”
Airbus is upbeat because Indian airlines are finally calling to discuss what they want next year, unlike in 2008 when aircraft deliveries were deferred or even cancelled.
“People are starting to discuss their fleet requirements once again and there is a growing interest,” Rao said, adding he may deliver about 20 aircraft each in 2010 and 2011 to Indian carriers.
Airbus had delivered 29 aircraft to Indian airlines in 2009.
US plane maker Boeing Co., too, is “quite bullish on India”, said Boeing’s India president Dinesh A. Keskar.
“Our forecast today is still about $100 billion (Rs4.59 trillion) worth of planes, or some 1,000 aircraft, for the next 20 years. If the infrastructure is in place and economic growth is in double digits... we will revise our forecast in July,” he added.
Boeing has 85 orders from Indian carriers, costing some $14 billion, including 27 Boeing 787s for Air India and 10 for Jet Airways (India) Ltd.
Canada’s Bombardier Inc. is estimating India would buy at least 560 small planes in the next 20 years.
Still, air travel in India could become more expensive because of an expanded service tax regime and a levy on crude imports from 1 April.
Finance minister Pranab Mukherjee’s Budget for 2010-11 has proposed a 5% customs duty on crude oil, up from nil until now. This will make aviation turbine fuel (ATF), which accounts for almost 40% of an airline’s operating costs, costlier.
The Budget has also proposed a new service tax net on domestic journeys, which Patel said he would discuss with the finance ministry. He also said he would take up the issue of sales tax with the state governments.
“The airline industry is a very cyclical business. It follows the economy,” said Trung Ngo, vice president (sales), Asia-Pacific, Bombardier.
“(The) Indian economy will probably grow fast(er) than it grew before. So there is no reason to believe that traffic will not follow,” Ngo said.