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Indian market analysis

IndiGo's agreement for the new aircraft appears to illustrate confidence in the Indian market's prospects despite the problems of overcapacity, losses and poor yields that followed an earlier wave of aircraft orders by the country's carriers.

And for once, despite usually disparate views on many subjects, Airbus and Boeing both agree that India - despite having suffered a false start - is set to be among the strongest areas of air traffic expansion over the next two decades.

IndiGo has remained outside the flurry of consolidation involving Kingfisher Airlines and Air Deccan, Jet Airways and Air Sahara, and the merger of Air India and Indian Airlines, as the airlines sought to counter economic pressures.

Carriers that emerged from India's increasingly liberalised market to place impressive orders during the period 2005-07 resorted to deferring deliveries or hunting for outlets to which they could sell or lease excess capacity.

India's in-service fleet of 100-seat and above aircraft has trebled in the 10 years to the end of 2010, to 320. Airbus chief operating officer for customers John Leahy says the IndiGo deal will enable the carrier to "take full advantage of the predicted growth in Indian air travel".

Airbus predicts in its latest global forecast that domestic Indian traffic volume is set to soar at 9.2% a year, the overall figure exceeding 250 trillion revenue passenger-kilometres by 2029. It also predicts traffic from India to China, South-East Asia and North America as being among the fastest-growing flows.

Boeing believes that Indian carriers have regained a degree of control after the initial euphoria. "Airlines have matched capacity more closely to demand, especially on newly launched international routes," says the airframer in its most recent 20-year outlook for India.

"Measures like [leasing-out] have proved effective in mitigating the near-term effects of the [economic] downturn and will, in the longer term, facilitate the return of leased airplanes to Indian carrier fleets."

IndiGo, which began services in 2006, is among the carriers set to take advantage of the Indian threshold that permits airlines to expand on to international routes after flying for five years.

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