Boeing says low fares by Indian airlines might hamper future expansion
Indian airlines are projected to need 2,300 planes worth USD 320 billion in the next 20 years amid unprecedented domestic passenger growth, aircraft maker Boeing said Wednesday as it raised the forecast for the country.
A senior Boeing official also flagged concerns about low fare yields of Indian carriers, saying it cannot be sustained. As much as 85 per cent of the 2,300 planes would be narrow-body and the rest would be wide-body. The forecast is for the 2018-2037 period.
According to Boeing, India would need 1,940 single-aisle planes worth USD 220 billion and 350 wide-body aircraft valued at USD 100 billion. At the current exchange rate, USD 320 billion is over Rs 22 lakh crore. Around 10 regional jets worth less than USD 1 billion would be needed during the 2018-2037 period.
"India continues to grow at a faster pace," Dinesh Keskar, Senior Vice President (Asia Pacific & India Sales) at Boeing Commercial Airplanes said here. Keskar also noted that the aviation market in India is "quite challenging" as most airlines are not making money even as there is strong passenger growth. He noted that exchange rate, fuel prices and fare yields are the challenges.
Boeing has raised its long-term forecast for commercial aeroplanes in India citing unprecedented domestic passenger traffic and rapidly expanding Low-Cost Carriers (LCCs).
Flagging concerns about low fare yields, Keskar said it cannot be sustained as airlines are losing money in India. Amid stiff competition, domestic airlines are offering low fares despite higher operational costs.
"We feel that fares in India even though the fares have come down, even though the exchange rates have come down they are at least 10-15 per cent lower than where you can break even.
"If operation-wise you are losing money, then you can do it a little bit, you can do it for opening some routes but you cannot do it on a sustained basis," he said. Boeing said that this year alone, more than 10 million passengers, on average, travelled within India each month.
"To meet this increased domestic air traffic growth, we see the vast majority of available aeroplane seats coming from LCCs," Keskar said. The success of this market segment would mean more than 80 per cent of all new aeroplane deliveries in the country would be single-aisles, he added.
According to him, the superior economics and fuel efficiency of the new 737 MAX aeroplane would be the perfect choice for Indian carriers. India is the fastest growing domestic aviation market in the world and registered 50th straight month of double-digit growth in October.
"Boeing continues to develop new fuel-efficient aeroplanes and market leading services to address the needs of our customers in India," Keskar said. About Boeing MAX planes, Keskar said, "we are assuring everyone that is a safe aircraft to fly".
Aviation regulator DGCA is monitoring on a daily basis the performance of Boeing 737 MAX aircraft apart from putting in place various measures to ensure there are no safety issues with these planes being operated in India.
(With inputs from agencies.)