Boeing sees India buying 490 aircraft
(Reuters)
Updated: 2005-08-05 11:11

Boeing Co. expects firms in India's booming civil aviation market to buy 490 aircraft over the next two decades as falling ticket prices and growing passenger traffic fuel demand, a company official said on Thursday.

Asia's third largest economy has seen a flurry of airline launches as several leading business houses have entered the sector. Discount carriers are luring travellers with cheap tickets.

"The demand which we are observing in India is one of the highest growth rates in the world today," Dinesh Keskar, vice-president for sales, told Reuters in an interview.

"We see a demand for about 490 aircraft for about $36 billion."

India now has fewer than 200 civilian aircraft compared with 750 in China and more than 6,000 in the United States.

But after years of crippling red tape, poor infrastructure and high costs, India is cutting taxes, throwing open the sector to new carriers at home and abroad, deregulating routes, developing its airports and modernising state-owned fleets.

Boeing, which competes with global rival Airbus in India, in April bagged an intensely fought $6.9 billion order for 50 long-range aircraft from state carrier Air-India.

Private carriers Jet Airways Ltd. and SpiceJet Ltd. are also Boeing customers. Indian companies were the stars at the Paris Air Show in June as they accounted for over half of the $13 billion of jet deals.

SPEND $20 BLN TO BOOST SECTOR

Analysts say the government and the private sector could invest about $20 billion over the next five years as demand for air travel surges. Keskar said he expected passenger traffic to grow more than 20 percent over the next three to four years.

"People are travelling because fares are dropping, the economy is growing and income levels in India are growing higher," Keskar said aboard a demonstration flight of the Boeing 777-200LR over the Indian capital.

About 19 million people travelled by air in the fiscal year to March 2005 and India's average annual air travel is 0.1 trips per person, a fraction of the global average of 2.0, industry figures show.

But the number is surging as the world's 10th largest economy is forecast to expand about 7-8 percent a year for the next five years.

In some cases, air fares rival luxury train tickets, bringing flying within reach of millions of more people in the country with a population of more than a billion. At present, more people travel by train in a day than by air in a year.

Keskar said falling fares could harm the balance sheets of airlines already hit by a surge in global crude oil prices, rising salaries and higher lease rentals.

A dozen more carriers are expected to begin services in the next 12-18 months but Keskar said the fragmented sector would undergo a bout of consolidation.

"It is not good to have 10 sick airlines in the country ... you want a healthly, profitable and reliable transportation system," Keskar, a 25-year veteran at Boeing, said.

Keskar said Boeing would firm up plans later this year to set up pilot training and aircraft maintenance units in India as many airlines are now basing these activities outside their home countries.

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