The grounding of Boeing Co.’s 737 Max 8 aircraft by India’s aviation regulator could lead to a surge in airfares, though it is unlikely to affect the long-term plans of SpiceJet Ltd and Jet Airways (India) Ltd, the only Indian operators of these planes.

Director general of civil aviation B.S. Bhullar told reporters on Wednesday that airlines had been advised to keep fares at a regular level. Lifting of restrictions on B737 Max 8 aircraft, Bhullar said, would be decided based on inputs from overseas regulators and Boeing. “There is no question of future deliveries of Boeing Max 737 until we allow them to fly in Indian skies," he said.

Indian operators are awaiting delivery of a total of 362 B737 Max 8 aircraft in anticipation of a surge in air passenger traffic. As many as 17 planes have already been delivered to SpiceJet and Jet Airways, but five of those planes, forming part of Jet’s fleet, have been grounded by lessors for non-payment of dues.


India is on course to become the world’s third-largest air travel market by 2024, overtaking the UK, a 2018 forecast by the International Air Transport Association said.

Airlines are increasingly relying on fuel-efficient aircraft such as the B737 Max 8 and its rival, the Airbus A320 Neo, to save costs amid intense competition.

Aviation consulting firm CAPA India expects the groundings to affect SpiceJet’s finances in the June quarter.

“(We) see impact on SpiceJet in Q1 (FY 2020) as current fleet of B737 Max is grounded, but all the near-term deliveries will have to be deferred till required modifications/enhancement are approved. This may take a few weeks," said CAPA’s chief executive for India and Middle East, Kapil Kaul.

“Grounding of planes will certainly impact airline capacity in the short term and the manufacturer is likely to come up with a solution. Changing fleet addition plans to opt for a different make or a different manufacturer is not an easy option for airlines," said Kinjal Shah, vice-president of corporate ratings at Icra Ltd.

Mint reported on 11 March that airfares on trunk routes, connecting major metro cities, had risen 30-50% year-on-year, after a severe capacity reduction due to the grounding of more than two-fifths of Jet Airways’s fleet and a runway closure in Mumbai.

The situation may deteriorate further.

“Grounding of additional planes will further impact fares, which were already high this season. Both domestic and international fares for flights to and from Mumbai and Delhi have seen an average increase of 40-50% and we expect fares to rise further due to shortage of planes," said Aloke Bajpai, CEO and co-founder of Ixigo.

If average fares across sectors increased by more than 20%, it could adversely affect demand as Indian flyers are very price-conscious, said Sharat Dhall, co-founder and chief operating officer of Yatra.

The Directorate General of Civil Aviation (DGCA) late on Tuesday night grounded all B737 Max 8 planes in India, in line with similar moves across the world after an Ethiopian Airlines flight crashed minutes after take-off, killing all 157 people on board. This was the second accident involving a 737 Max plane in five months. The first was of a Lion Air plane in Indonesia in October.

The Indian aviation regulator has decided to ground these planes until appropriate modifications are undertaken to ensure safe operations.

On Wednesday morning, DGCA said in a statement that airlines operating the 737 Max in India had been given till 4pm to withdraw these planes from operation.

The B 737 Max 8 plane that entered service in 2017, and is a rival to Airbus SE’s A320 Neo aircraft, is crucial to the operations of SpiceJet and Jet Airways, as both airlines have claimed that the plane could help cut costs significantly.

Boeing 737 Max planes witnessed robust demand globally as the company claimed they would bring down fuel costs of airlines by about 15%, and engineering and maintenance costs by another 10-15%.

Meanwhile, SpiceJet, which cancelled at least 14 flights on Wednesday due to aircraft groundings, is slated to fly additional flights on Thursday to accommodate passengers.

“Of the 76 planes in our fleet, 64 aircraft are in operations and we are confident of minimizing the inconvenience to our passengers and attain normalcy in our operations," the airline said in a statement.

“While a majority of passengers affected as a result of these cancellations have been accommodated by SpiceJet on alternate flights, rest have been offered a full refund," it said. “We are evaluating options for augmenting capacity in the coming days through a mix of additional flights and aircraft inductions. We are sure that our operations will be normal very soon."

Jet said it’s in touch with Boeing and the regulator and will implement all directives by those authorized, a company spokesperson said.

Boeing said the company has full confidence in the safety of its 737 Max aircraft.

“We understand that regulatory agencies and customers have made decisions that they believe are most appropriate for their home markets," Boeing said in a statement.

“We’ll continue to engage with them to ensure they have the information needed to have confidence in operating their fleets. The US Federal Aviation Administration is not mandating any further action at this time, and based on the information currently available, we do not have any basis to issue new guidance to operators," the company added.

rhik.k@livemint.com

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