India’s orderbook for new aircraft appears to be continuing in an upward trajectory following last week’s agreement by GoAir to purchase 72 Airbus A320neos, doubling its firm commitments for the re-engined variant to 144.
In total, the country has more than 750 aircraft to be delivered over the next few years. Apart from IndiGo’s massive order for 425 A320neos from previous air shows, Jet Airways has 75 Boeing 737 Max aircraft on order, Air Costa 50 Embraer E2 Jets, and SpiceJet 42 737-8s.
National carrier Air India also has 14 A320s, six 787-8s and three 777-300ERs yet to arrive, while Vistara is set to take nine more A320s from lessor BOC Aviation.
In addition, AirAsia India is bound to receive a substantial number of units from its parent carrier group which has 403 A320-family aircraft on order - including the 100 A321s ordered at the recent Farnborough air show.
Should SpiceJet’s earlier announced plan to expand its fleet to 150 aircraft come to fruition, that figure could rise to around 900.
That seems to be just the tip of the iceberg. Boeing has forecast that continued strong passenger growth will lead Indian carriers to take delivery of 1,850 new aircraft by 2035, worth $265 billion. Narrowbodies will continue to account for the largest share of new deliveries, with Indian carriers needing approximately 1,560 of them.
BETTER INFRASTRUCTURE NEEDED, AND FASTER
As Indian carriers eye faster growth, infrastructure constraints could cruel their ambitions. Some reports have expressed concerns that the large metropolitan hub airports will not be able to provide enough parking spaces, and there are already slot shortages and major delays usually attributed to air traffic control.
Airing his views on the recent aircraft orders by GoAir and AirAsia at the Farnborough air show on Twitter was Sanjiv Kapoor, chief strategy and commercial officer at Vistara pointed to infrastructure as a major choke point.
“Major airports in India do not have many slots left, yet hundreds of A320s on order. Where will they all fly, am really curious!” he tweeted on 12 July. “Make no mistake, the potential for air travel growth in India is huge over time. But [infrastructure] needs to come up first and fast!”
Not all share that view, however. Speaking to FlightGlobal, K.G Vishwanath, partner at Singapore-based Trinity Aviation Consultants, believes that that most of India’s tier I airports can cope with the large number of aircraft. He expects only Mumbai airport will face “severe congestion as they do not have the space to expand, unlike Hyderabad and Bengaluru”.
He adds that the government is taking too long to develop Mumbai's second airport at Navi Mumbai to help reduce congestion at the current hub. Construction of the new airport is scheduled to begin at the end of this year, with operations to commence in 2019.
Outside of the major metropolitan airports Vishwanath also criticises Delhi for “working too slowly” to improve infrastructure in the regions. Key improvements to runways and ground transport options for passengers are required to make them more competitive.
Despite the Indian government set to invest a reported $5 billion to improve airport infrastructure, revitalise ‘ghost’ airports and build new regional ones, Kapoor remains unsure of the business viability.
“Ghost airports are ghosts for a reason. There is currently not enough potential [to operate services to such destinations],” he said in a separate tweet.
Due to poor infrastructure, narrowbodies have been unable to fly to most of the ghost airports - all of which are operated by the government-linked Airports Authority of India.
In a bid to promote low-cost regional flights, the Indian government has set up a regional air connectivity scheme as of part of its new civil aviation policy. Airlines will be subsidised via a “regional connectivity fund” that will be supported by an additional excise duty of 3% on aviation fuel and a service tax of 10%, on top of the current airport charges.
Even with the recent flurry of orders, some believe that India’s carriers have not over-ordered considering its largely untapped growth potential.
“India’s annual GDP growth is around 8%, and with the aviation sector growing at an average of 15% year-on-year, orders of over 750 aircraft at the moment seem small,” says Vishwanath.
In addition, Boeing believes that the new aircraft will continue to support the growth of low-cost carriers – a claim evident by the respective large of orders made by the budget airlines.
The American airframer also expects low-cost carriers to continue dominating the Indian market, where they already account for more than 60% of all flights.
IATA has said that India had the fastest domestic passenger growth in 2015. At 18.8% growth in a market of 80 million domestic passengers, it outpaced growth in the other major domestic markets of Russia, China and the United States.
Vishwanath explains that mainline carriers have been quiet on the order front, as they are streamlining their businesses to improve utilisation and reduce cost with its current fleet. He warns however that it will get “harder to find profitable routes on the domestic market” and that it “does not make sense” to add more capacity between tier I and II destinations.
“It is likely that most of the new aircraft will be put on overseas routes, especially to southeast Asia and the Middle East. Quite simply, India sees international business more valuable than domestic,” he says.
New Delhi recently dropped the requirement that airlines operate for five years on domestic routes before expanding internationally, but has maintained a rule that they must have a fleet of 20 aircraft to do so. It is also moving to promote greater air connectivity to regional towns and cities.
But, as Kapoor warned in a separate television interview with CNBC India, going international is “not a walk in the park”.
He added that “it is not just a question of [getting] 21 aircraft and fly abroad”, as carriers airlines have to acquire rights, slots and various partnerships.
“Each market is competitive, each market has areas where you can succeed and areas which can work out.”
Source: Cirium Dashboard