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Boeing raises India market forecast; economic growth fuelling travel demand

13-Aug-2010

Boeing, in early Aug-2010, raised its 20-year forecast for Indian aircraft demand by 15%, as strong economic growth positively impacts travel demand in the world’s second most populous nation.

Boeing forecasts that the Indian aviation market will require 1,150 commercial jets valued at approximately USD130 billion over the next 20 years, to represent more than 4% of Boeing Commercial Airplanes’ worldwide forecast. In Jul-2009, Boeing forecast demand for 1,000 aircraft worth approximately USD100 billion over the 20-year period.

Boeing India President, Dinesh Keskar, commented: “There is strength and resilience in the Indian commercial aviation sector over the long term. The potential for future growth of air travel, both domestically and internationally, is among the greatest in the world and Boeing will continue its efforts to be India’s preferred partner and aerospace provider.”

Mr Keskar added that air travel in India, tied closely to the country’s economic growth, is expected to largely recover by 2011, adding that the operating environment for India’s carriers shows a positive turn, with passenger numbers, load factors and yields showing an upward trend on domestic and international services.

Mr Keskar continued: “We went through the deepest recession in the history of aviation but now India’s recovery is one of the fastest”, adding: “If you take a broad look at the India market, what resonates is more positive than negative and the prospect for continued long-term growth remains high.”  

Total Passengers on Indian carriers: 2001/01 to 2008/2009

Strong economic growth to continue

India’s economy is slated to grow at 8.5% annually over the forecast period, and remains among the strongest in the world. Meanwhile, the IMF is forecasting GDP growth of 9.4% in 2010, and 8.4% in 2011. The country’s growth has averaged more than 7% p/a since 1997.

Airbus anticipates need for 1,030 new aircraft

Airbus, in Mar-2010, also raised its forecast for Indian aircraft demand, with the manufacturer estimating the need for 1,032 new aircraft, valued at USD132 billion, in the 2009-2028 period, with these new aircraft valued at USD132 billion, making India the world's fifth largest aviation market.

Airbus Top Ten countries by passenger aircraft demand and value

The fleet requirement is expected to comprise 538 single aisle aircraft (A320 family), 287 twin aisles (A330 and A350 equipment) and 68 very large aircraft (A380), with 39 new freight aircraft (A330-200F) anticipated.

Airbus commented that Indian freight traffic is expected to grow almost four fold over the next 20 years, with Airbus forecasting that 164 cargo aircraft will operate within and from India by 2028. The current fleet is limited to only 12 aircraft.

Airbus India domestic and international freight forecasts

Airbus had previously stated India would require 992 aircraft between 2008 and 2027, valued at USD105 billion (both estimates based on orders for passenger and freight aircraft).

Airbus also anticipates that India domestic travel will be the fastest growing market for air travel over the next two decades, with domestic traffic increasing by an average 12.2% annually, to be seven times the 2008 traffic level. Overall traffic growth will be among the world's highest, averaging 7.3% over the next 20 years compared with the currently global average of 4.7%, according to Airbus, which added that “long term, the potential for growth in India’s aviation sector remains exceptional”.

Anticipated traffic (RPKs) volume in 2028

Travel propensity remains low; large potential exists

Travel propensity remains low in India, as the following graphics from both Airbus and Bombardier highlight. This indicates the large potential for increased travel demand in the country.

Travel propensity by region: Airbus

Propensity to travel by region: Bombardier

Bombardier expecting 5% of deliveries to go to India

Meanwhile, Bombardier in its 20-year outlook, released in Jul-2010, stated it expects, in the next 20 years, that there will be a geographic shift in delivery demand, with China and India to be the two growth regions.

Specially, India, from a small base today, is expected to take 5% of the deliveries and will grow to 4% of the 20- to 149-seat fleet, up from 1% today. This will result in growth from 120 to 650 of these aircraft type by 2029, according to Bombardier. Overall, India is predicted to take 600 deliveries, representing 36% of the total deliveries within the Asia/Pacific region.

Bombardier added that India is a key driver of economic growth in the Asia/Pacific regional with a GDP growth rate of 6.3% expected over the next 20 years.

GDP Growth Rates: Compound Annual Growth Rate (2010-2029)

India pax fleet currently comprised of 372 aircraft, with 294 orders

According to Ascend, India’s passenger airlines currently have an in-service fleet of 372 aircraft, with orders for 294 aircraft.

India’s current and future fleet: as at Aug-2010

Operator

Aircraft

In Service

Order

Total

Air India

A310

4

0

4

Air India

A319

24

0

24

Air India

A320

36

0

36

Air India

A321

20

0

20

Air India

A330

2

0

2

Air India

B747

5

0

5

Air India

B777

21

3

24

Air India

B787

 

27

27

Air India Total

n/a

112

30

142

Air India Express

B737(NG)

21

0

21

Alliance Air

ATR 42

7

0

7

Alliance Air

B737

2

0

2

Alliance Air

CRJ700

4

0

4

Alliance Air Total

 

13

0

13

Go Air

A320

8

12

20

IndiGo Airlines

A320

28

67

95

Jagson Airlines

Dornier 228

2

0

2

Jet Airways

A330

12

5

17

Jet Airways 

ATR 72

8

6

14

Jet Airways 

B737 (NG)

49

22

71

Jet Airways 

B777

3

2

5

Jet Airways 

B787

 

10

10

Jet Airways Total

 

72

45

117

Jet Airways Konnect

ATR 72

6

0

6

Jet Airways Konnect

B737 (NG)

4

0

4

Jet Airways Konnect Total

 

10

0

10

JetLite Airways

B737 (NG)

17

9

26

 JetLite Airways

CRJ Regional Jet

3

0

3

JetLite Airways Total

 

20

9

29

Kingfisher Airlines

A319

4

0

4

Kingfisher Airlines 

A320

13

67

80

Kingfisher Airlines 

A321

6

0

6

Kingfisher Airlines 

A330

4

15

19

Kingfisher Airlines 

A340

 

2

2

Kingfisher Airlines 

A350

 

5

5

Kingfisher Airlines 

A380

 

5

5

Kingfisher Airlines 

ATR 72

17

23

40

Kingfisher Airlines 

125/Hawker

1

0

1

Kingfisher Airlines Total

 

45

117

162

Kingfisher Red

A320

10

0

10

Kingfisher Red 

ATR 42

2

0

2

Kingfisher Red 

ATR 72

8

0

8

Kingfisher Red Total

 

20

0

20

SpiceJet

B737 (NG)

21

7

28

Star Aviation

E170

0

7

7

Total

 

372

294

666

SpiceJet announces order for 30 B737-800s

Such is the optimism at SpiceJet, the carrier’s Board this month approved a new order for 30 B737-800 aircraft, with deliveries to commence in 2014 for a period of four years. The carrier did not specify how the purchase would be funded. The existing fleet of aircraft are all leased. The carrier plans to add 15 aircraft over the next two years.

SpiceJet currently has a fleet of 21 B737-800/900s with seven more deliveries scheduled up to 2012 (one more in 2010, and two each in 2011 through 2013 according to Ascend). SpiceJet added that it is evaluating "a far more aggressive fleet expansion" over the next 18 to 24 months than originally planned, with acting CEO and Director, Kishore Gupta, adding: “The current pending orders with Boeing, the more aggressive short-to-medium term fleet expansion and this fresh order for 30 aircraft will ensure that Spice not only continues to be ahead of industry growth, but also consistently offers value-for-money fares to its customers”.

The carrier has previously commented: “With Maran coming in, we have the money now; earlier, with Wilbur Ross, the aim was to consolidate and break even. The company was earlier planning to bring in four aircraft, but we will add three more to the tally. For the next financial year, we will require about eight more”.

Mr Gupta, commented: "We are currently seeing a strong resurgence in domestic air traffic growth on the back of robust macro-economic growth. We expect domestic demand to grow at 16% during the current year and to sustain a 12-14% annual growth going forward in the medium term. The growth will necessitate significant capacity induction and the fresh order announced by us today will ensure that SpiceJet will remain at the forefront of the growth story in the Indian skies”. The carrier’s revenues, meanwhile, are expected to increase in the 15-20% range in FY2011.

India's LCCs on rapid expansion trajectory

India’s independent LCCs - IndiGo, SpiceJet and GoAir - are set to nearly double their fleet capacity over the next 17 months from 56 to 104 aircraft. Currently, Indian air carriers offer 115,000 domestic seats per day, of which LCCs (including the economy units of Jet Airways and Kingfisher) comprise approximately 70% of the total. 

Go Air, Indigo and SpiceJet current and future fleet orders

 

Current Fleet

Orders

Go Air

8

12

Indigo

28

67

SpiceJet

21

37

IndiGo, the largest LCC, is scheduled to receive 21 A320s over the next 17 months, with seven of these scheduled for delivery in 2010. GoAir, currently operating a fleet of eight aircraft, plans to add two new aircraft in 2010 and has stated it may advance deliveries of ten aircraft currently scheduled for delivery in 2011/2012.

Outlook: Emergence of a more favourable environment

After the dramatic changes of the last five years, the Indian aviation industry is now seeing the emergence of a more favourable environment, supported by an economic recovery, which has boosted demand levels in the domestic market.  Looking forward, there is large scope for continued and rapid growth, with a large and increasing population, coupled with a low propensity to travel, improved infrastructure in the country and increased international connectivity as foreign airlines seek greater access to the world’s second most populous nation.

Accordingly, Civil Aviation Minister, Praful Patel, stated he expects India will be “in the top five civil aviation markets all across the world” within the next five years, up from ninth largest currently, adding: “That, I think, is a great achievement in the remarkably short period of time.”


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