Indian airfares unsustainably low, says Boeing
Indian carriers will need 2,300 planes worth $320 billion in 20 years: Boeing
New Delhi: Airfares in the fast-growing Indian market are 10 to 15% lower than breakeven levels for airlines, a Boeing Co executive said, as the planemaker raised its long-term jet order forecast for the nation to a record despite market challenges. Major Indian carriers, including Jet Airways, IndiGo and SpiceJet, were in the red in the September quarter as high oil prices, a weak rupee and intense price competition eroded their margins.
It is important for the sustainability of the sector that airlines show more discipline in pricing fares, Dinesh Keskar, senior vice-president, Asia Pacific and India sales at Boeing Commercial Airplanes, said on Wednesday. “Double-digit growth coupled with losses is what I am concerned about,” he said. “I will forego 2 to 3 percent growth for making money rather than filling up my airplane at rock-bottom prices and never making money.”
To date, however, the lack of profitability has not affected deliveries to Boeing clients, which include cash-strapped Jet Airways and budget carrier SpiceJet, Keskar said.
India’s passenger traffic has risen at around 20% in recent years, making it one of the world’s fastest-growing aviation markets. Boeing expects the country to become the third-largest commercial aviation market by the early 2020s.
Boeing sees Indian carriers ordering a record of up to 2,300 new planes worth $320 billion from global planemakers over the next 20 years to 2037, about 9.5 percent more than its previous prediction of 2,100 jets until 2036 made last year. It said single-aisle planes, such as its 737 MAX, would account for 84% of global planemakers’ new jet deliveries to India over the period, higher than the world average.
The forecast comes amid signs that pressure on the Indian airline sector, dominated by low-cost carriers, is starting to ease as oil prices fall and the rupee firms.
Kotak Institutional Equities last week said in a note to clients that there were signs the worst was over, with data showing flat fares in the third quarter ending December 31, versus a 9-10% drop in the previous two quarters.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed
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