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Despite slowing growth in India, Airbus and Boeing remain bullish on the demand for civilian aircraft from the country. Analysts and industry experts, however, warn of lower-than-anticipated passenger growth, unless urgent steps are taken to revive the sector.
In their market forecasts last year, Airbus and Boeing had estimated demand for 1,232 and 1,450 planes from India, respectively through the next two decades. However, that was at a time when Kingfisher Airlines was still in service. Also, they had estimated growth in India’s gross domestic product (GDP) at about eight per cent. Similarly, a civil aviation ministry report for the formulation of the 12th five-year Plan (2012-17) had factored in 12 per cent average annual growth in domestic air traffic between 2012 and 2017.
Last financial year, GDP growth slowed to five per cent; this year, it is estimated to grow about six per cent. Domestic air traffic growth, too, is subdued. Analysts and airlines expect growth of about six per cent this year.
Despite the slowdown, aircraft manufacturers remain optimistic. “Our forecasts look at passenger traffic growth through a 20-year period, which takes peaks and troughs into account. This growth is translated into demand for aircraft. India continues to be one of the fastest-growing regions for aviation traffic growth in the world through the next 20 years. So, our forecast for new aircraft in India will not be dramatically adjusted,” Airbus said in an email response.
A Boeing spokesperson said, “Our airline customers have indicated they will continue with their fleet plans. India is projected to have the highest passenger traffic growth in the world. Over the next twenty years, the forecast passenger growth is expected to be driven by an underlying economy with long-term growth projections of twice the world average, supported by continued economic prosperity among a growing segment of the large Indian population, higher discretionary incomes, business progress and easier access to airports.”
Domestic airlines did not respond to emails on the subject. A Jet Airways source said though the domestic market was slow, it could cross-utilise Boeing 737s for international operations. Jet Airways has pending deliveries of 46 Boeing 737s and expects to induct a plane each month through the next three-four years.
It is expected IndiGo would add 50 planes to its existing 70 Airbus A320s by 2017. SpiceJet planned to add eleven Boeing 737s to its 55-aircraft fleet by the end of 2014-15 and was seeking early deliveries, a source said. Though the airline has an option include an additional 15 Bombardier Q400 turbo props to its fleet, it has held back the decision due to subdued passenger demand.
In 2010, the Centre for Asia Pacific Aviation (Capa) had estimated airline traffic in India would touch 450 million (domestic and international) by 2020-21. Capa is set to revise its 10-year India forecast in September. Now, it feels airline traffic at 375-400 million by 2020-21.
“We expect the industry fundamentals to be positive from 2015 due to introduction of Gagan (GPS and geo-augmented navigation system) and the implementation of flexible use of air space, which would reduce fuel consumption. I expect aviation turbine fuel to be given a declared-good status in the next 12-18 months, or key states would reduce sales tax to four per cent, and this would bring very significant cost advantages. The introduction of Airbus A320neos and Boeing 737 Max would further reduce operating costs and the focus on building the ancillary business could create additional revenues of $400-500 million a year in the next two-three years. Capa expects the Indian economy to be back on the growth path from 2015-16. However, the next 12-18 months are critical because the trading conditions would be very tough, costs and risks will be at a peak and holding costs for some will become unbearable. Raising funds will be fundamental to survival in the near term, especially the next 12 months,” Capa’s Kapil Kaul said.
“In 2013-14, air traffic is likely to see five-eight per cent growth, buoyed primarily by international traffic. The rising dollar has helped bring down the cost of travel and accommodation in India for foreign travellers. With the continued hammering of the rupee and the Indian economy in deep distress, domestic traffic growth might be nearly flat or in a low single digit,” said Amber Dubey, partner and head (aerospace and defence) at global consultancy KPMG .“Projections for 2014-15 and thereafter would be pure speculation. It depends entirely on the outcome of the 2014 general elections and what the new government does to boost investment, aviation and tourism,” he added.
In their market forecasts last year, Airbus and Boeing had estimated demand for 1,232 and 1,450 planes from India, respectively through the next two decades. However, that was at a time when Kingfisher Airlines was still in service. Also, they had estimated growth in India’s gross domestic product (GDP) at about eight per cent. Similarly, a civil aviation ministry report for the formulation of the 12th five-year Plan (2012-17) had factored in 12 per cent average annual growth in domestic air traffic between 2012 and 2017.
Last financial year, GDP growth slowed to five per cent; this year, it is estimated to grow about six per cent. Domestic air traffic growth, too, is subdued. Analysts and airlines expect growth of about six per cent this year.
Despite the slowdown, aircraft manufacturers remain optimistic. “Our forecasts look at passenger traffic growth through a 20-year period, which takes peaks and troughs into account. This growth is translated into demand for aircraft. India continues to be one of the fastest-growing regions for aviation traffic growth in the world through the next 20 years. So, our forecast for new aircraft in India will not be dramatically adjusted,” Airbus said in an email response.
A Boeing spokesperson said, “Our airline customers have indicated they will continue with their fleet plans. India is projected to have the highest passenger traffic growth in the world. Over the next twenty years, the forecast passenger growth is expected to be driven by an underlying economy with long-term growth projections of twice the world average, supported by continued economic prosperity among a growing segment of the large Indian population, higher discretionary incomes, business progress and easier access to airports.”
Domestic airlines did not respond to emails on the subject. A Jet Airways source said though the domestic market was slow, it could cross-utilise Boeing 737s for international operations. Jet Airways has pending deliveries of 46 Boeing 737s and expects to induct a plane each month through the next three-four years.
It is expected IndiGo would add 50 planes to its existing 70 Airbus A320s by 2017. SpiceJet planned to add eleven Boeing 737s to its 55-aircraft fleet by the end of 2014-15 and was seeking early deliveries, a source said. Though the airline has an option include an additional 15 Bombardier Q400 turbo props to its fleet, it has held back the decision due to subdued passenger demand.
In 2010, the Centre for Asia Pacific Aviation (Capa) had estimated airline traffic in India would touch 450 million (domestic and international) by 2020-21. Capa is set to revise its 10-year India forecast in September. Now, it feels airline traffic at 375-400 million by 2020-21.
“We expect the industry fundamentals to be positive from 2015 due to introduction of Gagan (GPS and geo-augmented navigation system) and the implementation of flexible use of air space, which would reduce fuel consumption. I expect aviation turbine fuel to be given a declared-good status in the next 12-18 months, or key states would reduce sales tax to four per cent, and this would bring very significant cost advantages. The introduction of Airbus A320neos and Boeing 737 Max would further reduce operating costs and the focus on building the ancillary business could create additional revenues of $400-500 million a year in the next two-three years. Capa expects the Indian economy to be back on the growth path from 2015-16. However, the next 12-18 months are critical because the trading conditions would be very tough, costs and risks will be at a peak and holding costs for some will become unbearable. Raising funds will be fundamental to survival in the near term, especially the next 12 months,” Capa’s Kapil Kaul said.
“In 2013-14, air traffic is likely to see five-eight per cent growth, buoyed primarily by international traffic. The rising dollar has helped bring down the cost of travel and accommodation in India for foreign travellers. With the continued hammering of the rupee and the Indian economy in deep distress, domestic traffic growth might be nearly flat or in a low single digit,” said Amber Dubey, partner and head (aerospace and defence) at global consultancy KPMG .“Projections for 2014-15 and thereafter would be pure speculation. It depends entirely on the outcome of the 2014 general elections and what the new government does to boost investment, aviation and tourism,” he added.
