Indian airlines to order 1,500-1,700 aircraft over next 2 yrs

Indian carriers will place orders for 1,500-1,700 aircraft over the next 24+ months, starting imminently, because the Indian market, in the post-COVID era, is attracting global attention as arguably the most promising aviation market, says the latest report by aviation consulting and research firm CAPA India.

Notably, Air India is reportedly expected to make the first move, with reports saying that it will shortly place a historic order for close to 500 aircraft, marking a genuine turning point in the Indian aviation industry. “Air India Limited has been widely reported to be about to place an order for close to 500 aircraft, split between Airbus and Boeing. It could end up being the largest order in global aviation history, in terms of both the number and value of aircraft, which are expected to include a mix from the A320neo and 737 MAX families, as well as widebody equipment,” says the report.

Overall, the Indian carriers currently have just under 800 aircraft on the order, of which IndiGo (InterGlobe Aviation Ltd) accounts for 500, which would increase to close to 1,300 if the Air India order materialises as expected.

The aviation sector in India is gradually moving towards full recovery. Domestic air traffic rose 13.7% year-on-year (YoY) to 127.35 lakh passengers in December 2022 as compared with 112.02 lakh passengers in the corresponding period last year, as per the DGCA data. India retained its place as the airline with the biggest market share, followed by Tata group-owned Air India, which dethroned another Tata firm Vistara to become the second biggest domestic airline in the month.

With the aviation industry looking at traffic recovery in the next few months, almost every carrier in India is expected to order more aircraft in the next couple of years. Notably, IndiGo had been planning to place a significant order of around 300 aircraft prior to COVID, which was deferred due to the pandemic. “This is now likely to proceed and could be even larger than previously envisaged, increasing to around 500 aircraft now,” says the CAPA report.

Despite the easing of supply chain issues like the shortage of engines by the end of FY2024, it is believed that aircraft and engine OEMs face a very significant backlog of orders that could take years to address. “Airbus and Boeing combined had 12,669 unfulfilled orders as of 31-Dec-2022. Delivery slots are very hard to come by for at least the next couple of years, while for narrowbodies the situation is reportedly tight until 2029,” says the CAPA report.

It says to secure timely delivery slots to support growth plans, carriers like Akasa Air and GoAir Airlines will need to place scale bets by entering into new orders, with a sense of urgency.

Due to the pressure of orders relative to production challenges resulting from supply chain and other issues, the costs of aircraft and engine acquisition, as well as after-market services, may get expensive for Indian airlines, says the report.

The report suggests the civil aviation ministry should continue to work on convincing the remaining large states to rationalise VAT on aviation turbine fuel, while at the same time continuing to work to bring down other direct and indirect taxes.