Indian airlines doing better; need to get fares right: Boeing

Bullish on Indian aviation market, top aircraft maker Boeing has said that operating environment has improved for airlines in the country but there is a need to get the airfare metrics right to make profits.

"We are very clear that the Indian market is going to grow at the fastest rate across the world. Our 20-year annual growth rate forecast for India currently stands at 8% and we had estimated the country's aircraft requirement at US $205 billion.

"But we will revise upward this forecast this month," Boeing India President Dinesh Keskar said.

Keskar, also a Senior Vice President at Boeing Asia Pacific, said at the Paris International Air Show that fundamentals remain good for the Indian aviation market, irrespective of the absence of any major announcements of orders placed by Indian carriers at the week-long show.

"There are basically three factors that affect the aviation market -- fuel prices, exchange rate and the basic supply-demand ratio.

"The first part, which is fuel prices is very much under control. The exchange rate may be still high, but it has broadly remained within a range and that is a positive.

"The third factor, which actually determines the fare and therefore can impact the sector in a big way, is the only area where there is some concern," Keskar told PTI in an interview.

He said: "I am hopeful that there would be an improvement on this front as well. The average Delhi-Mumbai airfare today is just adequate enough to break even for an airline. The low cost carriers are today seeing 90 per cent load factor and therefore I am not concerned on that front as well.

"But what I think is that a high load factor and a low fare is not a good idea. Besides, the basic infrastructure remains an issue."

On the positive side, Keskar said airlines are expected to begin showing profits from the current quarter.

"Even Air India has begun reducing its losses, although revenue still remains low. One of the private players has already reported a profit, while the other has cut the losses significantly," he said.

On aircraft purchase plans of the carriers, Keskar said that only one carrier has gone for cutting its fleet size while Jet is still cautiously adding to its fleet.

"Air India is actually doing pretty well and one of the reasons could be their use of our fuel-efficient 787," he said, while adding that another key factor for an airline to make profit is the fleet deployment," he said. 

"From our side, we are doing our own innovations to cut the costs. We are making our planes much more fuel efficient, we are providing bigger windows and better humidity on the flight for greater comfort of the passengers," Keskar said.

There are services like wi-fi and better TV screens to make the flying experience much better especially on the long-haul flights, he said.

"We are trying to lower the costs through innovative measures. That is always the goal. For over 300 787 that are currently flying, we procure many components from India and also from various other countries.

"We also tell our suppliers that they need to keep the cost at the minimum so that the cost at the end of the airline is also kept lower. After all, a good growth in market would be good for everyone," he said.

Keskar added: "We have used special composite material for our 787 aircraft. For maintenance at the end of the airline also we are trying to cut the costs with innovation. We have already enhanced the maintenance cycle from 18 months to 24 months and now our goal is to take it to three years.

"The D-Check, the highest level of the checks we need to carry on an aircraft, is currently required after ten years and we are trying to increase it to 12 years at least."