Consolidation in the Indian aviation business may be good news for the airlines left standing, but it doesn’t warm the hearts of airplane salesmen who only see fewer buyers for their planes.
It is against this backdrop that Airbus Industrie will shuffle its existing aircraft orders to Indian buyers and its US rival The Boeing Company will lower expectations of new orders at the world’s biggest air show this week.
The Paris air show, a biennial congregation of the aerospace industry where buyers announce multi-billion dollar aircraft and engine purchases, begins Monday at Le Bourget airport near Paris.
At the last air show here in 2005, when India’s new crop of airlines were the flavour of the gathering, Airbus Industrie disclosed orders worth $33.5 billion (Rs137,350 crore) at list prices. Boeing clinched orders worth $15 billion. United Breweries group-run Kingfisher Airlines Ltd ordered 15 passenger A330s, A350s and A380s, which it will start receiving by February next year. Low-cost carrier IndiGo lobbed in a surprise order for 100 Airbus A320 planes.
However, between then and now—the two years saw orders for 480 aircraft—a lot has changed. Despite the market having grown 40% in terms of passenger traffic in the last two years, demand for tickets has lagged seats in the sky.
Airlines such as GoAir Ltd have reduced their fleet size, from seven to four, owing to overcapacity even as the collective Indian aviation industry posted a loss of $500 million in 2006-07.
“Both airlines (Kingfisher-Air Deccan and Jet-Sahara) have same aircraft, same engine, same instructors, same pilots—all that goes towards creating a healthier industry. What the healthy industry does is to order more aircraft,” says Kiran Rao, Airbus’ executive vice-president (marketing and contracts). “We will rejig orders, we will move orders around to match the new fleet plans. There would be no cancellations.” Airbus is delivering one plane a week to India currently.
But a senior Kingfisher Airlines official, who didn’t want his name used, said his airline and Deccan Aviation Ltd, in which Kingfisher bought a controlling 26% stake, are likely to place a combined order for both long haul aircraft including A340s and narrow bodied aircraft at an estimated $2.5-3 billion. Kingfisher’s executive vice-president Hitesh Patel declined to confirm the amounts involved.
The long-haul plane orders reflect Kingfisher’s international flying ambitions, said an analyst. “As for the narrow-bodied (aircraft), their business plan reflects the requirement post-2012. They could be looking at ordering now to get it cheaper,” Kapil Kaul, a New Delhi-based analyst with Centre of Asia Pacific Aviation said. “But till 2012 they need a serious correction in there fleet size.” Kingfisher and Air Deccan, which counted together use 73 aircraft in their fleets, have about 80 Airbus jets and 50 turboprop ATR-planes on order till 2012.
Other carriers such as Jet Airways (India) Ltd, which is the second-largest airline by passengers flown, could also be looking for long haul planes. Jet Airways’ executive director Saroj Datta said the company was studying lease and purchase options for a cargo airline that it expects to start by the year-end. Cargo is an emerging aviation market that new Indian firms such as Flyington Freighters are jumping into. Flyington has already signed for six Airbus A330-200F freighters for an estimated $1 billion at list prices choosing over Boeing’s planes earlier this year.
Boeing admitted it did not expect new orders from India at Paris this week. “Air shows are great to make a splash but its just one of the 52 weeks in a year,” said Dinesh Keskar, senior vice-president Boeing Commercial Airplanes, in a phone interview.
Boeing has about 32 orders for narrow-bodied aircraft from India: 18 from SpiceJet Ltd, four for Jet Airways and 10 for its subsidiary JetLite (formerly Air Sahara). And, it has its largest order from an airline ever from India: 68 long-haul planes it is to supply national carrier Air India.
Keskar said Boeing is undertaking a new “marco-analysis forecast” for aircraft purchase, results of which it will announce next month. Its current forecast stands at 492 civilian airplanes valued at $36 billion over the next 20 years.