April 5, 2018, © Leeham News: India is one of the fastest-growing aviation markets in the world, with airlines there ordering a massive number of airplanes for their size.
The most prominent airlines have nearly 1,000 airplanes on order. The leading, and most profitable, low-cost carrier, Indigo, is now considering ordering up to 50 twin-aisle aircraft for its first foray into long-haul, LCC service, in competition with the perennial loser, Air India.
It’s also one of the most challenging aviation environments. The government has policies that make it difficult for carriers to operate efficiently.
There have been a number of airline start-ups that make competition fierce. There have been a lot of airline failures.
Boeing last year forecast a demand in India for 2,100 aircraft through 2036, an increase from 1,850 the year before. This represents 5% of Boeing’s global forecast.
Boeing sees a demand for 1,780 single-aisle airplanes, which includes a mere 10 regional jets, and 310 twin-aisle airplanes.
LCCs in India account for 60% of the traffic, Boeing notes. India’s traffic is growing at a rate of more than 20% per year, compared with a global rate of 7%.
“Today, three out of four people in India fly on LCCs,” says Dinesh Keskar, SVP for Asia-Pacific and India for Boeing. He said there are two distinct travelers, one wanting the full service of the mainline carriers and the other wanting the bare-bones cost of LCCs.
By 2050, India and China will be the world’s top two economies, Boeing says.
The Airbus forecast is more conservative. Airbus predicts demand for 1,750 airplanes through 2036. About 430 of these will be twin-aisle aircraft. Airbus does not forecast regional jets.
It believes India will become the third largest aviation market by 2019/20.
Airbus claims 70% of the backlog and 60% of the in-service fleet. Indigo drives much of this data.
Littered with dead airlines
India is littered with airlines that either died or seem to be in perpetual financial straits.
In recent years, Kingfisher Airlines is the highest profile casualty of the fickle Indian environment. Founded in 2005, it grew quickly—too quickly—to become India’s second largest airline. It placed large orders for Airbus aircraft, including the wide-body A330 and A380. By 2012, it accumulated more the US$1bn in losses. By the end of the year, the government suspended the airline’s operating certificate. It’s founder and principal owner, Vijay Mallya, fled to London to avoid criminal charges and debtors.
During its early years, Kingfisher bought the failing Air Deccan to achieve mass in the domestic market. (A new airline using the Air Deccan name began operations in 2017.)
Air India is perpetually in financial turmoil. Jet Airways and SpiceJet also have their struggles. Etihad Airways bought a large shareholding in Jet as part of its strategy, itself turning out to be ill-fated, to extend its reach in India. (Etihad also bought shares of airlines in other regions.) Etihad itself is now in financial turmoil.
SpiceJet had a string of losses through 2015, finally turning a profit in 2016 and 2017 for the fiscal years ending March 31.
Air Costa, a regional airline, lasted four years before ceasing operations in 2017. Its demise is particularly bad news for Embraer: Air Costa ordered 50 E195-E2s. EMB has no other announced customers for the airplane.
Indian Airlines, which was Air India’s main domestic competitor, was merged into Air India, but the combination didn’t help the surviving company improve its financial performance.
There are nearly three dozen operating passenger, cargo and charter airlines in India, according to a list in Wikipedia.
Of the top seven airlines, six are LCCs and the seventh is Air India. Five of the seven account for nearly 80% of the orders from Airbus, Boeing, Bombardier and ATR. Indigo by far has the largest backlog. GoAir is a distant second.
Indigo is the largest airline in India, by a wide margin, with a 39.5% market share through last year, according to data provided by Go Air at the Airfinance Journal annual conference in Dublin in January.
LCC Jet Airways is second and legacy carrier Air India is tied for third with LCC SpiceJet.
Air Asia (India), a recent entrant into the market, has a meager 4.5% share.
Indigo appears gearing up to challenge Air India on international routes. Officials recently said they are considering acquiring up to 50 Airbus A330neos, likely a mix of orders and options. A deal, especially if it includes the 8,150nm A330-800, will be a boost for the slow-selling A330neo. The A330-900’s advertised range is 7,500nm.
“In India, there have been boundaries drawn about who is with who,” Dinesh told LNC during an interview on the sidelines of the first delivery of the Boeing 737-9 MAX, to Lion Air. “Our customers Air India, Jet Airways and Spice Jet. We have other airlines that are still operating that can go either way.
“I think the type of aircraft is something the airline will decide,” he said.
Indigo will make its call, but Dinesh—not surprisingly—believes the 787 is superior to the A330neo.
“I won’t say we are competing for Indigo, but we have the right airplane,” he said.
The “boundaries” are informal and not government policy, says a person close to Indian aviation, speaking anonymously in order to speak freely.