A battle of two

The battle for the Indian skies between the two large aircraft manufacturers is continuing apace. In July, Boeing added orders for three 777-300ER aircraft from Jet Airways, in addition to the several 777-300ER and 787 aircraft that the airline had ordered earlier. This came a few months after Kingfisher Airlines confirmed orders for Airbus’s new A350XWB aircraft and SpiceJet confirmed 10 additional 737NG orders.

Since the 2005 Paris Airshow, where Indigo placed a massive $6-billion (Rs 26,400 crore then) order for 100 A320-family aircraft from Airbus, and Kingfisher ordered five Airbus A380s, the pace of orders bagged by Boeing and Airbus has not slowed down.

Boeing, which won the huge Air India order for 68 aircraft in early 2006, is now readying itself for a possible followup order, which Civil Aviation Minister Praful Patel said is on the cards, but it may face tough competition here. “Most of these 50 wide body 777 and 787 aircraft ordered by Air India will replace existing planes,” Patel said when unveiling Air India’s new aircraft 777-200LR. “But if Air India is to grow, it needs new planes, not just for international operations, but also for domestic operations. And we will evaluate both Airbus and Boeing aircraft,” he added.

And it isn’t just Air India that will be ordering new planes. According to Airbus’s 2006-25 forecast, domestic traffic is expected to grow 12.3 per cent annually over the next two decades, and international traffic (accruing to Indian carriers) at 7.6 per cent; growth will be faster in both segments during the first decade due to “frustrated” demand. Airbus predicts that 935 new passenger aircraft will be needed in India over this period.

Boeing’s 2007 forecast for India makes similar projections, but pegs the requirement of new planes at 911. Both reports, though more or less similar, differ on one major point—Airbus thinks the Indian market will need 44 very large aircraft (like Boeing 747 and Airbus A380) while Boeing places that number at the considerably more modest nine.

But the battle is not just being fought in India. Globally, Airbus forecasts a demand for 22,663 aircraft between 2006 and 2025. Boeing’s latest forecast made recently is for 28,600 new aircraft worth an estimated $2.8 trillion (Rs 115 lakh crore) by 2026.

Currently, there are 18,230 aircraft in operation worldwide; by Boeing’s forecast this number is going to rise to 36,420 by 2026. And this is assuming that air travel grows by only a modest 4.5 per cent annually.

Yet, while these two large manufacturers continue to squabble in a near-perfect duopoly, where both are actually sold out for the next couple of years, smaller manufacturers such as Brazil’s Embraer, Canada’s Bombardier and the European ATR (which, like Airbus, is part of EADS) have been enjoying success in India.

M. Thiagarajan, CEO, Paramount Airways, is a dedicated Embraer operator and expects to be in Brazil in September to close a $2-billion or Rs 8,200 crore (at list prices) order for 25 new Embraer aircraft. “We feel that the Embraer suits our requirement for small-capacity aircraft operating to non-metro cities,” says Thiagarajan, who plans to have a fleet of 35 E170/E175 aircraft by end-2011.

The other smaller aircraft-makers, too, have their dedicated fans. “Despite the CRJ-200 (from Bombardier) having higher costs per seat mile, we believe that they can certainly be profitable because they can operate on small high-yielding routes,” says Gary Kingshott, CEO, JetLite, which operates seven CRJ-200 aircraft (though only three are currently operational).

ATR, a turboprop maker, has seen huge success in India with Air Deccan, Alliance Air, Jet Airways and Kingfisher operating over 30 of these planes. And given the government’s focus on regional aviation, sales of these small 50-100-seat aircraft might shoot up, even though both Airbus and Boeing give it but a cursory mention. But CRJ and ATR operations may be hit following the decision of the Delhi and Mumbai airports (the two largest in the country) to clamp down on small aircraft operations. This may impact their popularity and sales in India.

However, despite the competitive environment, one thing is certain. Even if the airlines might find profitability a hard task, aircraft manufacturers will be making a pretty penny from India.