Boeing Gung-ho about India Market Growth

 by Neelam Mathews
Dec 20, 2018

Boeing upholds its buoyant outlook of the Indian market and raised its long-term forecast for new aircraft demand for the fifth consecutive year, projecting the country’s airlines will need 2,300 new jets by 2037. This is 9.5 percent more than its previous prediction for a supply of 2,100 new aircraft by 2036 made last year and compares with a forecast for some 1,600 new jets predicted back in 2014. If the revised outlook materializes, Indian airlines would almost quadruple their fleet over the next two decades. The Indian commercial fleet stood at 620 aircraft at the end of July, according to data of the Directorate General of Civil Aviation.

“Unprecedented” domestic passenger traffic and rapidly expanding low-cost carriers (LCCs), which account for 64 percent of the total seat capacity in India, fuel the need for new aircraft, Boeing said. India’s domestic passenger traffic has recorded a consistent double-digit growth for the past 50 months.

“To meet this increased domestic air traffic growth, we see the vast majority of available airplane seats coming from LCCs. The success of this market segment would mean more than 80 percent of all new airplane deliveries in the country would be single-aisles,” Dinesh Keskar, senior vice president (Asia-Pacific and India sales) Boeing Commercial Airplanes, said in New Delhi, while presenting the India Commercial Market Outlook for 2018-2037.

Low yields due to cut-throat competitive fares being offered in the market are a concern and need to become sustainable, he emphasized. “Fares in India are amazingly low despite the high [taxed] aviation fuel prices. India will be hurt more and more, and it is important that discipline comes to fares,” Keskar said. “However, it is like a chess game. Whoever takes the risk of increasing the fare even by $5 stands to lose business to his competitor. That is the reason everybody is afraid to play. The Indian market is very elastic and price-conscious.”

Although India has experienced huge domestic traffic growth, the widebody share of domestic available seat-kilometers (ASK) has remained restrained—2.6 percent in 2017—as airlines have been able to increase frequencies and single-aisle gauge. Keskar told AIN budget carriers would find it difficult to enter the widebody market and compete with their full-service counterparts, given their experience and cost efficiencies with wide-bodied aircraft, which “are complex.” But, he added, “India has a large market and it could happen.” Boeing projects a demand for 350 new widebodies in India over the next two decades.

Led by budget carriers IndiGo and SpiceJet, growth in India is outpacing global averages. The number of flights to/from/within India grew 14.4 percent in the past 12 months compared to 4.9 percent globally. ASKs globally grew 7 percent and 15.9 percent in India. India was close to reaching 12 million air passengers per month, which Keskar said “was absolutely astounding.”

Keskar said if there was just over 1 percent shift of passengers from railways to airplanes, "it would double the aviation market.” The Indian railways carry 23 million long-haul passengers daily. Economic growth will further propel air passenger traffic. “The Indian economy is projected to grow by nearly 350 percent over the next two decades to become the third largest economy in the world,” said Keskar. "This will continue to drive the growth of India's middle class and its propensity to travel both domestically and internationally. Indian airports handled some 180 million passengers in 2017 and this is expected to double in the next five years."