Boeing in a better position than Airbus as Indian airlines slash aircraft deliveries

2008 was the year reality struck home in the Indian airline industry. One whiff of the downturn exposed the lack of robust business planning, and abundance of financial vulnerability of Indian carriers, leaving all of them battered and bruised, some more than others.

We saw mass-scale defaulting on payments by carriers in India to everyone from airports to aircraft manufacturers.

Touted as THE growth sector of the future by both Boeing and Airbus in 2007, in the last nine months, domestic airlines have slashed capacity and with very shallow pockets, pulled back at least one-third of their aircraft orders due for delivery this year.

India’s domestic airline capacity shrank by more than 8%, compared with 3.5% in Japan and growth of 18% in China.

As late as mid 2008 Boeing, Airbus SAS and Empresa Brasileira de Aeronautica SA (Embraer) were projecting delivery of 91 aircraft during 2009. They will now thank the stars if they can deliver the reduced quantity of 57 aircraft expected this year.

Both Boeing and Airbus are claiming that no airline has "cancelled orders", but this statement does not account for the deferrals in delivery and the diversion sales of aircraft by Indian carriers to foreign airlines.

In this highly competitive market, it appears that Boeing has the upper hand. It is facing deferral of only two of its 22 expected deliveries down 10%, while Airbus is down 53% expecting to deliver only 32 out of the expected 68 aircraft in large part due to Kingfisher. Embraer increased its delivery tally to five aircraft up 500% from the projected one thanks to the phenomenal growth of Paramount Airways their main customer

Boeing Customers

Jet Airways with fleet of 111 aircraft accounts for the two deferrals of Boeing. One 777-300ER and one 737. Jet has leased out a significant portion of its wide-body fleet. A total of seven of its eleven uber-luxurious Boeing 777-300ERs to Turkish Airlines THY and Gulf Air, and two each of its Airbus A330-200s to Oman Air and Gulf Air. Jet has called for a further ten per cent cut in seat capacity and is now trying to leasing out its narrow body Boeing 737s.

Image courtesy and copyright A.J. Best. Used with his permission. Please do not re-use without permission.

SpiceJet with 12.5 per cent growth will take delivery of 12 Boeing 737-800s/900s, one each quarter for the next three years adding to its fleet of 14 Boeing 737-800s and 900s.

Air India backed by the Government of India, will take delivery of its new Boeing 737-800s, four 777-300ERs and and three 777-200LRs by September, as scheduled. Air India (domestic and international combined) has a fleet of 150 aircraft. The combined order to Boeing and Airbus was for 111 aircraft.

Airbus Customers

The largest domestic carrier and most aggressive Airbus customer Kingfisher Airlines is in terrible financial shape. It led all Asian carriers with a 17.1 per cent capacity cut and has held its expansion to its existing 76 aircraft not withstanding the fracas with GECAS on four of its aircraft. It has diverted its three of its five A340-500s to Arik Air of Nigeria, the balance two have become "white tails" at Toulouse. Of the five A330-200s delivered, two are lying idle. Kingfisher is now in talks with Arik Air in an effort to lease them. The deliveries of the A380 have been deferred yet again. Even pending deliveries of ATR42s and 72s from the Air Deccan days are languishing at Toulouse. Kingfisher has been forced to defer delivery of 32 of 48 Airbus A320 planes that were due for delivery in late 2008 and in 2009 and is also diverting its narrow body A320 family orders to foreign airlines like Turkish THY. So while Airbus may deliver planes to an Indian airline, the aircraft may never come to India.

IndiGo along with fellow value carrier SpiceJet has been registered increasing market share, and has recently taken delivery of its 19th Airbus A320. It is maintaining a more conservative but steady delivery rate.

Air India domestic (formerly Indian Airlines) will maintain its delivery with Airbus for the narrow body A320 family having recently taken delivery of three each A321-200s and A319-100s. Airbus has also commenced discussions with Air India on the A380 superjumbo and hopes to convince the airline to buy a few.

While both Boeing and Airbus do not expect any new orders from the Indian market in the near to medium term, they continue to be bullish on India and maintain their market forecasts which estimates that the country’s airlines would buy up to 1,100 planes over the next 20 years.