Aviation industry aims for growth with sharp focus on supply in 2024

Supply-chain glitches and engine recalls are threatening capacity expansion in the Indian aviation industry. IndiGo may have to ground a quarter of its fleet, and the sector could see a grounded fleet of around 200 aircraft by the end of the financial year.

Anu Sharma
First Published3 Jan 2024
While the supply constraints are visible in the near term for the sector, the demand is showing signs of strong growth.
While the supply constraints are visible in the near term for the sector, the demand is showing signs of strong growth.

New Delhi: The year 2023 was a roller-coaster ride for the Indian aviation industry. If Go First going under was the most significant setback, the record number of domestic travellers taking to the skies was its biggest feat.

With the new year having just dawned, the industry is looking into the days and months ahead with caution, as capacity expansion is threatened by supply-chain glitches in availability of engines, spare parts, and engine recall by Pratt & Whitney impacting India’s largest airline IndiGo.

IndiGo, which has a domestic market share of nearly 62%, may have to ground nearly a quarter of its fleet by March due to an engine recall by Pratt & Whitney for inspection, and the persistent issues related to shortage of engine supply by the US-based aerospace manufacturer.

Currently, less than 150 aircraft of the 340-aircraft fleet of IndiGo are powered by Pratt & Whitney engines.

“To further expand our capacity, we have retained 14 of our older Airbus A320ceo (current engine option), extended leases on 36 other aircraft, and the process is under way since November to induct 11 additional aircraft on lease. Additionally, we will be leasing 12 more A320ceos from the secondary market starting January. Furthermore, we have already placed orders for 970 aircraft, which will enable us to achieve our long-term goals,” a spokesperson for IndiGo told Mint.

In addition, with the induction of one new aircraft per week, the airline hopes to hedge against some of the aircraft grounding caused by the powder metal issue in Pratt & Whitney engines.

Aviation consultancy firm Capa India estimates that the Indian aviation sector may see a grounded fleet of around 200 aircraft by the end of the current financial year, from approximately 160 currently, with nearly 90 aircraft of IndiGo, and 25–30 each of the Tata Group-backed Air India and low-cost carrier SpiceJet. In addition, 54 aircraft of Go First are grounded since the airline suspended flights in May.

While the supply constraints are visible in the near term for the sector, the demand is showing signs of strong growth. This was reflected in the daily air demand in December at nearly 450,000 travellers, marking the highest demand in the history of Indian civil aviation.

The average daily air traffic hovered around 400,000 passengers in the pre-pandemic year of 2019.

The growing potential of Indian aviation, driven by an expanding middle-class, rise in income fuelled by a robust economy, has also encouraged the concept of twin-airport model catering to such centres of demand. This started with the launch of Mopa airport in Goa in January 2023, with the existing airport at Dabolim still running at full steam. In 2024, the National Capital Region and Mumbai are also set to see the launch of Noida international airport and Navi Mumbai airport to cater to the rising demand.

“The industry is expected to gain from an increase in aircraft orders, as airlines are extensively allocating resources to acquire new fleets in response to rapidly growing demand. The construction work at Noida International Airport is progressing in full swing. We have reached the final floor level of the passenger terminal building. The air traffic control (ATC) tower, standing at its full height of 38 metres, is on track to be finished and ready for handover to the Airports Authority of India by the first quarter of 2024. Additionally, the 3,900-metre runway is coming to life,” Christoph Schnellmann, chief executive officer, Noida International Airport, said. The airport has recently onboarded IndiGo as its inaugural carrier, TajSATS for catering facility, and is expected to finalize food and beverage and lounge concessions over the next few weeks.

“By mid-year, we expect to start trials and look forward to the first test flight taking off around that time,” Schnellmann added.

The infrastructure build-up is critical, as 2023 witnessed mammoth orders of 500 aircraft by IndiGo and another 470 aircraft by Air India, including a wide-body fleet of 70 aircraft. A three-digit order is also expected from India’s youngest airline Akasa, which has gained a market share of 4.2% in India in the 16 months since its launch in August 2022. With an air travel penetration of 3–4%, there is an untapped potential which is catching the attention of not just the Indian carriers, but also international airlines.

“2023 was another record year for Virgin Atlantic in India, as we flew over 620,000 seats, our highest ever. Next year, we will take this even further to 850,000 seats with the launch of a daily direct Bengaluru to London service in April 2024. Our strong performance in this market gives us full confidence to grow with full flights and Indian travel demand remaining buoyant,” Alex McEwan, senior manager APAC (Asia-Pacific), Virgin Atlantic, said.

The year gone by was also about Indian policy makers encouraging an ecosystem of aerospace manufacturing in India in order to truly build a sustainable aviation model to address issues in supply chain and reduce foreign-denominated expenses for the aerospace companies. A significant step in that direction was the launch of C-295 transport aircraft manufacturing facility by Tata-Airbus in Vadodara for the Indian Air Force.

“While the current supply chain constraints are expected to continue to a great extent through 2024, much will depend on how well companies develop, diversify and derisk their supply sources. While Aequs has done this to a large extent, we also see the current scenario as an opportunity that will propel not only the China+1 drive, but also a shift from other geographies to India,” Aravind Melligeri, chairman and chief executive officer of Belagavi-based aerospace manufacturing company Aequs, said.

“We will surely be cautious of the impact of high Inflation in the New Year. It will not only impact the cost of operations, but also have a telling effect on demand offtake, which we are already seeing in the Western markets,” he added.

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