Indian aviation comes of age

Of the 280 airbus orders, 135 are headed for India

It will not be a surprise if the restaurant complex at the global headquarters of Airbus in Paris starts serving Indian food. That's because of the burgeoning number of visitors to the Airbus office and the massive orders that are being placed by Indian carriers with the French aircraft maker.

Of the 280 aircraft Airbus has received order for at the Paris Air Show, 135 are headed for India. Moreover, of the $50 billion that Airbus can earn from these deals, the contribution of Indian carriers is over $15 billion.

"India is at the threshold of a new wave of growth. We are seeing unprecedented growth in the aviation sector here. This will continue for some time," believes Rahul Bhatia, managing director, InterGlobe Enterprises, which placed firm orders for 100 aircraft worth $6.5 billion at the show.

It is anticipated that orders placed by new Indian carriers, most of them low-cost carriers, will be over 200 in the current financial year itself. Compared with this, the seven Indian carriers in operation together own about 175 airplanes.

Says Sanket Deshpande, research analyst at the Mumbai based Bonanza Research: "What Reliance did to telecom, LCCs are about to do to aviation. The falling air fares will result in many first-time fliers, who would have otherwise travelled by rail."

Earlier this year, Airbus forecast that the number of new aircraft it would sell to Indian carriers would go up to 400 from 220 by the year 2023.

This will make the India the third largest market for new aircraft in Asia, behind China (1,790) and Japan (640), according to Airbus' Global Market Forecast 2004-2023. The aviation industry is of the view that the European aircraft maker may have to again revise its projection upwards.

Rival Boeing expects India to buy aircraft worth $35 billion in the next 20 years. The demand, according to Boeing, will be driven by new carriers as well as by the government's decision to allow Indian carriers to fly on international routes.

Indian Airlines will soon order 43 Airbus A 320s, Air India Express will buy 18 Boeing aircraft and Air India will buy 50 aircraft to meet its growth requirements. The two state-run carriers will invest over $8 billion in the next few years to modernise their fleet.

Air Deccan, which has a total 18 aircraft (five Airbus and 13 turbo-propelled small aircraft), in December ordered 30 A320s for delivery from 2007 to 2010, plus options to buy another 25 airplanes.

Kingfisher Airlines signed a contract with Airbus in December for four A320s and exercised six options, making a total of ten aircraft on firm order.

In addition, it will have options to buy 20 aircraft and has placed fresh orders for 15 aircraft, including five A 380s at the Paris Air Show.

Jet Airways has placed orders for 40 aircraft (20 firm and 20 options) with Airbus and Boeing. Low-cost carrier SpiceJet will also buy 20 Boeing aircraft soon. Besides, every new carrier launched in the country will need to buy a minimum of five aircraft to start operations, as stipulated under the licence condition, in the next 12 months.

The growing aviation sector in India has also got leading global funds interested in the Indian market. The aircraft makers, too, are helping the airlines tie up funds.

"If you have the right business plan, funding is not an issue. Companies are more than willing to fund the Indian carriers," says GR Gopinath, managing director, Air Deccan.

Aviation industry sources say that the growth stems from the fact that the Indian aviation market will be growing at 25 per cent in the first nine months of the year and the trend is expected to continue for the rest of the year.

The total air traffic in India is projected to rise by 5 million passengers each year over the next ten years. Besides, India's domestic air passenger market will grow over 30 per cent this calendar year to about 23 million.

However, this growth can be hampered by infrastructure constraints at Indian airports.

The Delhi and Mumbai airports, the largest and most advanced in the country, can handle only 30 aircraft an hour, compared with the global standard of over 75. Passenger terminals at these two airports cannot handle more than 1,000 passengers at a time, while major airports around the world handle many times over.

"The concern is going to be operations and infrastructure. How will our airports handle the increasing air traffic?" says Amitabh Malhotra, assistant director, NM Rothschild & Sons.

Civil Aviation Minister Praful Patel is aware of this problem. "The industry is growing very fast. We need world-class infrastructure. The government is working towards it," he says.

Patel and his team are giving final touches to an ambitious $40 billion airport upgrade programme.