is pushing India to take delivery of aircraft on order, while at the same time acknowledging there is too much capacity in India’s commercial aviation market.
“The problem with the growth in India is it’s not profitable growth,” says Dinesh Keskar, Boeing senior VP of sales for Asia Pacific and India. No industry can sustain the losses the Indian airline industry has been posting, he adds. “You cannot sell air fares below cost. It has to end at some point,” says Keskar, who was speaking to reporters during a press briefing yesterday at the India Aviation Exhibition in Hyderabad.
Keskar attributes the losses to too much capacity as well as rising costs, particularly higher fuel prices. Money-losing airlines in turn “cannot raise funds in the market,” he adds.
Because airlines have little control over the cost side of the equation, the way to be profitable is to increase revenue by raising air fares, says Keskar. “Air fares need to increase by 15%. If the industry doesn’t do this, then it will continue to have massive losses.”
He also says airlines need to explore new markets. “Airlines need to have the right route structure. If everyone flies Mumbai-New Delhi and no secondary routes, then no one is going to make money. It’s about having the right capacity and demand match.”
Even though over-capacity has caused problems for India’s airline industry, Boeing is still pushing hard for carriers to honor their commitments and take delivery of aircraft on order.
Boeing had an-8 on static display at the Hyderabad aviation exhibition, not to show it off to the public, but to send a clear message to Air India and the Indian government that its 787s are ready for delivery, and ready now. Two 787s have already been completed for Air India, says Keskar
Boeing was hoping to deliver Air India’s first 787 in December, but had to delay it because Air India had yet to train its pilots for the 787, says Keskar, adding that he is confident the first 787 will be delivered to Air India in the second quarter. Keskar says pilot training takes only five days if the pilots are switching over from Boeing.
India’s government has been discussing how it will finance the 27 787s Air India has on order. The latest reports suggest the government will allow Air India to do sale/leasebacks.
Keskar says Air India traditionally has made use of export credit agency (ECA) financing. “This is something still available to them today,” he says. “They can also do sale/leasebacks. They [the government] will find a way out of it. We are continuing to build these aircraft for Air India,” he adds.
Air India needs these 256-seat aircraft because it has never found a replacement for itsA310 widebodies that were phased out, says Keskar. Today there is a gap in Air India’s fleet between its 180-seat narrowbodies and 350-seat widebodies, he says.
Besides 787s, Air India also has three Boeing 777s on order, although none of them are due for delivery so soon, says Keskar.
He also says India’shas 10 787s on order, but the first is not due to be delivered until 2014. It also has about 43 on order, and SpiceJet has 30 737s on order, he adds.
Keskar, during the briefing, took a not so subtle swipe at Airbus by saying Boeing sold aircraft to airlines in India only after “making sure the airlines had a business plan and a plan that made sense to us.”