Analysis: Record plane orders raise the stakes in India's aviation boom

Spicejet

21/06/2023 02:30

(Repeats earlier story with no changes to text)
    By Aditi Shah and Tim Hepher
       NEW DELHI/PARIS, June 20 (Reuters) - Record plane orders
by India's top two carriers show the country's untapped
potential for air travel and its rise as an aviation superpower,
but recent airline failures and rows over regulations suggest
progress may not be smooth.  
    Indian budget airline IndiGo  INGL.NS  announced at the
Paris Airshow on Monday the biggest ever plane order by number
of aircraft with a deal for 500 Airbus  AIR.PA  narrowbody jets.
    A day later, rival Air India firmed up an order for 470
Airbus and Boeing  BA.N  aircraft that, until Monday, had been
the industry leading plane deal. 
    With a total of almost 1,000 jet orders between them, IndiGo
and Air India are betting an economic boom and growing middle
class will spur demand for domestic air travel, and new jets
will help them grab a bigger share of international traffic.
    The number of domestic air passengers in India is expected
to surge to 350 million by 2030, up from 144 million in 2019,
with international air travellers up to 160 million from 64
million in 2019, according to aviation consultancy CAPA India
and government data.
    The number of airports in India is also set to climb to 200
over the next five years from 150 today, as the government looks
to connect the country's remotest areas by air.     
    "It is time to seize the skies," civil aviation minister
Jyotiraditya Scindia told reporters in New Delhi on Tuesday,
adding the new planes would help Indian airlines expand at home
and across continents.
    IndiGo, which operates a fleet of 300 planes, is yet to take
delivery of some 500 jets from previous orders with Airbus. 
    This puts the total deliveries by planemakers to Indian
carriers at more than 1,500 over the next decade and beyond -
double India's existing fleet of 700 planes across all airlines.
   
    That makes India a key market for planemakers, especially
Airbus which has bagged the bulk of new orders, outdoing U.S.
rival Boeing, and engine manufacturers whose wares will be put
to test.
    
    LEASING CONCERNS 
    But while the opportunity in India is big, so are the risks,
says Ameya Joshi, an independent aviation analyst. 
    The recent failure of Go First, the third Indian airline to
go under in 11 years, has exposed a gap in local regulations
over the protection of rights of foreign leasing firms that
finance many large plane deals. Indian budget carrier SpiceJet
 SPJT.NS  is also facing the ire of lessors over unpaid dues.
    Leasing companies warn that restrictions on repossessing
their assets in case of defaults will drive up costs for all
Indian airlines - even for IndiGo and Air India. 
    "There needs to be a huge regulatory revamp to protect
lessors' interests. It will eventually help Indian airlines by
lowering risk and moderating lease rental costs," said Joshi.
    India is a critical market for lessors. Sale-and-leaseback
deals - where airlines sell planes to lessors to free up capital
and then rent them back - accounted for 75% of plane deliveries
in India from 2018 to 2022, compared with a global average of
35%, data from aviation analytics firm Cirium shows.
    This is causing concerns among some leasing companies that
fear being too exposed to a market fraught with risks. 
    Some analysts also say that the airlines could be
over-ordering jets in pursuit of the same passengers.
    The bullish outlooks from IndiGo and Air India, which
together control about 80% of the domestic market, suggest both
are starting to benefit from their scale compared to rivals.  
    Joshi expects annual passenger growth in India to taper to
6%-10% going forward, coming off highs of 20% seen in the
immediate aftermath of the pandemic. But he thinks the market
will stabilise as weaker airlines will fall by the wayside. 
    "India is moving towards becoming a stable market where
growth will not be as high but airlines will be profitable and
connectivity will be better despite higher fares," he said.

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 (Reporting by Aditi Shah and Tim Hepher
Additional reporting by Joanna Plucinska in Paris
Editing by Mark Potter)
 ((aditi.shah@tr.com; +91-11-4954 8023, +91-11-3015 8023;
Reuters Messaging: twitter: @aditishahsays))