Stars of India

Four big orders at Paris showed that India’s airlines are ready for the big time, but the country’s airports and workforce are not.

  • E-Mail
By  Neil Denslow Published  July 4, 2005

|~|Jet-Airways&Airbus_i.jpg|~|Naresh Goyal, chairman of Jet Airways, (left) with Airbus' Noel Forgeard|~|The ambitions of private Indian airlines dominated the Paris air show, with four carriers, including two start-ups, announcing orders. The deals included the first Indian order for A380 superjumbos from Kingfisher Airlines, and a massive order for 100 A320s from start-up carrier, IndiGo. Following Air India’s recently announced order for 50 long-range Boeing aircraft, and sizeable orders from other players in the market, it is clear that India’s airlines are gearing up to take the leap into the big leagues. However, the country’s airports and skills base threaten to hold back these ambitions. The announcements at Le Bourget heavily favoured Airbus, which picked up three big deals. Kingfisher made the biggest splash with its US $3 billion order, which comprised five A350s, five A330s and five A380s. These were the first A380s ordered from India, although Airbus predicts that there will eventually be 20 of the superjumbos flying in the country. “We will begin with the Airbus A330, which is a great aircraft and already in widespread service, and then we will create a sensation when we become the first Indian carrier with the 21st century flagship A380, before adding the world’s newest airliner, the A350” says Dr Vijay Mallya, chairman of the UB Group, the parent company of Kingfisher Airlines. More surprising than the Kingfisher’s A380 deal though, was IndiGo’s order for 100 A320s, which ranks as one of the largest ever orders made by a start-up carrier. The airline, which has plans to become a nationwide low cost carrier, will clearly be a major player in the future, as it has $100 million in start-up capital and backing from InterGlobe Enterprises, one of India’s largest travel companies, and Rakesh Gangwal, the ex-CEO of US Airways and Worldspan. However, despite this pedigree, the size of the order was unexpected. “IndiGo ordering 100 aircraft was a surprise,” says Kapil Kaul, CEO, Indian Subcontinent, Centre for Asia Pacific Aviation. “I do not think that any airline in history worldwide has made a $6 billion purchase of aircraft without even starting flights.” Jet Airways also made an unexpected order at the show. It firstly announced a deal for 20 Boeings, comprised of six 777-200LR Worldliners, four 777-300ERs and 10 737-800s, which will expand its all-Boeing fleet. However, it then ordered 10 A330s with options for 10 more, and revealed plans to lease A330s from ILFC, which will give it a mixed fleet. “Jet’s order for 777 and 737-800s was expected, as all along it has been a Boeing customer, but suddenly looking to purchase A330s was a surprise,” says Kaul. Rounding out the Paris orders, Paramount Airways, which is backed by textile company, Paramount Group, also outlined plans to launch an all-business class service using Embraer 170s, which will make it the launch customer for the type in India. Following this plethora of orders at Paris, and previously announced deals, such as Air Deccan’s order for 32 A320s, other airlines also quickly revealed plans for more orders in the coming months. Air Sahara, for instance, said that it was likely to soon order 40 aircraft, probably 737s and 777s, for delivery over the next five years, which would raise its fleet total to 65. Boeing also said that it expected low cost carrier SpiceJet to soon add to the order it made in February for 10 737-800s and 10 options. Flag carrier, Air India should also firm up its provisional order for 50 Boeing long-haul aircraft, including 27 787 Dreamliners. ||**|||~||~||~|The strong demand for cargo capacity into Iraq and Afghanistan is one of the key factors that has enabled Rus Aviation to quickly grow its operations. The company’s fleet has grown from four planes in 1999 to now comprise nine IL-76s and four An-12s, all of which are leased on ACMI basis from operators in Russia and the CIS. This arrangement helps cuts costs for the company and also spares it from the headaches associated with owning planes. The company has recently expanded its fleet in this way by becoming the GSA for Click Airways, which operates four IL-76s and three An-12s. “Recently we have signed an agreement with them to handle their commercial department. We will be doing consultations for them, plus we will be handling all types of commercial agreements on their behalf,” explains Al-Aroud. “We have already started on arranging some interline deals for them,” he adds. These extra aircraft will help Rus Aviation as it looks to push into new markets. In particular, the company is focusing on the Eastern European market, as well as looking to benefit from the boom in air cargo out of China. “We are trying to increase our operations between Eastern Europe and the Middle East, and by the middle of May we will start operations to China,” says Al-Aroud. “We have received permissions for a few flights and we are now going through the procedures to get flights on a regular basis… The Chinese market is really big and there is more than enough space for everyone to work there,” he adds. The company is also targeting Africa, and it has already operated a number of aid flights into Sudan, for instance, as well as regularly carrying fish, fruits and other perishable items into Europe. “We are focusing now on the African market, as this is one of the best ways to get into Europe,” says Al-Aroud. At present though, the company can only operate flights into Eastern Europe, as its planes do not meet noise restriction regulations in Western Europe. This means that while Rus Aviation can handle some humanitarian flights, it is unable to carry commercial loads to half of the continent. As such, the company is planning to buy at least two Western-made aircraft, either L10-11s or DC-10s, by the end of the year, which would then allow it to serve these markets. “We have plans now to get two Western aircraft to serve Western Europe,” says Al-Aroud. “We are already in negotiations with some companies to purchase aircraft, but I think it will take six months.” To support this move into Western Europe, the company is also planning to open offices in London, Paris and Spain, as well as appointing agents there. “We also already have customers there from when the IL-76 was allowed into Europe,” adds Al-Aroud. These Western aircraft will allow Rus Aviation to resume services for these clients, and Al-Aroud predicts that in the longer run they may also prove necessary for serving the company’s existing customers in Eastern Europe and elsewhere. “In going for the Western aircraft, we are getting ourselves prepared for the future, as I think there will one day be noise restrictions in the entire region, and, of course, we will have to keep on flying then,” he says.||**|||~||~||~|Altogether, the Centre for Asia Pacific Aviation predicts that India’s commercial aircraft fleet will rise from 180 at present to between 640 and 700 by 2010-12. There will also be a flood of new services from international carriers, as the country begins to open up its skies. However, there could well be enough demand in the country to satisfy this huge surge in supply because of India’s massive population and its tiny air travel market at present. There were only around 19 million domestic air passengers last year — not many more than the number of people who travel on India’s railways each day — and six million international flights. However, the challenge will be supporting these new aircraft both in terms of finding skilled personnel to fly and maintain them and also building airports where the planes can land. A number of airports in the country are in need of improvement, notably including Delhi, which requires a second runway, and Mumbai. These two airports are now nearing the end of a long-running privatisation saga, which should see development work begin in the near future, but significant improvements are unlikely to be completed for a few years at least. Similarly, Chennai and Calcutta, which are next on the government’s modernisation list, are also unlikely to see major development work within the next five years. New greenfield airports at Hydrabad and Bangalore are also in development and 25 non-metro airports have been included in a government-led $1.5 billion modernisation, which will further increase the capacity available in the country. However, all these projects are unlikely to have any impact for a number of years. “Long term [airports are] not a problem, but in the short-to-medium term there is a problem. This is where I feel the domestic airline business might go through a slight slowdown or dropping off,” comments Kaul. “There could also be some investment that to some extent does not materialise, so there could be a crisis as far as infrastructure is concerned.” Even more pressing than the issue of airports, however, is the need to find pilots, engineers, flight dispatchers and other skilled personnel. This is a huge challenge, as with 500 new planes likely to enter the country’s fleet in less than a decade, the country needs to quickly find 5000 pilots alone. “This is where the government has no answer and the industry has no answer,” says Kaul. “Infrastructure is a medium term problem, but there is already a crisis as far as the availability of skilled personnel is concerned.” The problem of finding skilled personnel is compounded by the limited amount of training taking place in the country and the strong demand for pilots from neighbouring countries that can often offer better salaries. “The Gulf, Singapore, Malaysian, and other Asian national airlines are all poaching [airline staff] from India,” notes Kaul. Solving this problem will require the major new private players to invest in training and to break their reliance on poaching staff. Kaul also highlights another potential source of recruits: the 1200 unemployed pilots with commercial licences in India who cannot get jobs, as they are unable to afford to get type-rated. However, getting these pilots back in the air, along with resolving the other issues facing the country’s aviation sector will require coordinated action from both the government and the airlines. “It is up to the government to build a strategic plan with the users, if we are to overcome these infrastructure and people shortages,” Kaul concludes.||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code