Is Boeing Ready for Asia Pacific’s Next Chapter?

26-May-2015

Asia Pacific is set to become the largest air travel market in the world and, by 2033, experts anticipate that 48 percent of global traffic will be to, from, or within the region. To accommodate those staggering numbers, as many as 13,460 new airplanes will be needed. Dr. Dinesh Keskar, senior VP of Asia Pacific & India Sales, Boeing Commercial Airplanes, reports on the latest opportunities.

With such tough competition in Asia, what is Boeing's sales pitch? For example, how does Boeing convince Air India to order the Dreamliner over Airbus?

Before the merger of Air India and Indian Airlines, almost 7 years ago, we had offered a significant transaction for our 777s and 787s. Because of our superior product and what we offer our airline customers, we were able to convince Air India. That sort of decision-making goes all the way to the Cabinet - in India they do very detailed and thorough analysis of everything.

Our market focus today in India is roughly $205 billion with 1,600 new airplanes for the next 20 years. As a byproduct, we have also built a huge state-of-the-art maintenance facility for $100 million that has been handed over to Air India.

How does a concept like the Dreamliner even take form?

We are continuously talking with the airlines and visionaries around the world about the next big thing. In early 2000, there was a debate over whether to build an airplane that goes 20 times faster or one that is 20 percent more cost-effective at the same speed. That's how the 787 came to life.

Will there be a next "big thing" after the Dreamliner?

The 777X was the largest product launch in commercial jetliner history by value, mostly in the Middle East: Emirates, Qatar Airways and Etihad Airways. Just like the Dreamliner was a game-changer, the two variants of the 777X will open new routes, will be highly efficient and the economics will be significantly better.

Air India once said that the Dreamliners would be at the center of its of the plan to revive its fortunes, but now reports say it is reviewing its orders. What are your thoughts on this transition?

Airlines in India operate in a dynamic market. You cannot have four 747s and take on the world. We went through a period in which Air India was not leading the world in terms of technology, and now they have one of the largest 787 Dreamliner fleets anywhere in the world.

Air India's 20 787 Dreamliners are providing them with superior performance, which has allowed them to open new routes and make progress in their turn-around plans. In regards to the airline "reviewing" its orders, Air India is very happy with their Dreamliners. As our customers such Air India evaluate their fleet needs we work with them to provide the right products and services. We are currently in talks with them to swap some of their 787-8s for 787-9s - the larger variant of the Dreamliner family.

Are there challenges in air travel that are unique to India?

In India, the number-one thing I have concerns about is supply and demand. Fuel prices are good now, but India has significant fuel taxes at federal and state levels. The exchange rate has stabilized, which has a significant impact because they pay for these costs in U.S. dollars. If we didn't have these conditions, it would be difficult for airlines to exist. Despite the challenges though, we remain bullish on the long-term potential of the Indian aviation market.

With so many underserved regions in India, what is the outlook on regional jet travel? Are people ready to trade rail travel for air?

In India, the market is very sensitive to price, however the middle class is getting bigger and better. In the early 1980s and 1990s, air travel was too expensive and the train was the only means of travel. Now, with the privatization of airlines in India, Jet Airways, Indigo, GoAir, and Spice Jet have all enhanced the quality of domestic travel to India and it has given people economical choices.

Where else in Asia is Boeing seeing significant growth?

China, India and Indonesia will be the growth markets of the future, and coming close on their heels is the Philippines.

The growth rate in Indonesia, in particular, is phenomenal. Boeing has done its largest-ever deal in Indonesia when LionAir ordered 201 737 MAXs and 29 Next-Generation 737-900ERs for $21.7 billion. Last year, Garuda Indonesia ordered 50 737 Max 8 airplanes with a list value of $4.9 billion.

The low-cost carriers in Asia will also be a significantly large market. Overall, Asia Pacific airlines will need 9,540 new airplanes to expand their single-aisle fleets, and LCCs are expected to take 40 percent of single-aisle deliveries.

With such rapid growth of air travel in Asia, how does that impact issues as pilot shortages and quality training?

The regulators want to see safe and reliable transportation, and that is fundamental. As growth increases there is a lot of pilot movement and, in particular, we're seeing a big migration of pilots going to the Middle East.

The only way we can solve that is to create infrastructure for training, to produce adequate pilots and mechanics. It doesn't happen overnight. The good thing is the new technology on aircraft like the 787 and the 777X has become so easy to use.

We are predicting that airlines will need 36,800 new planes by the early 2030s with Asia Pacific accounting for about 37 percent of that. The airlines plan for it, and we're doing everything we can to make sure they are adequately prepared to fly.