Last week’s Paris show saw Indian airlines accounting for a third of orders. This is a $23bn bet on the future of an industry that suffers from state meddling and support for a dinosaur national airline. Taking such a big bet is very brave.
India does not have the ability to handle all these planes. When the nation will have the infrastructure in place is a great question – we would bet plane deliveries come faster. Which is going to be a huge pain for the airlines. Kishor Ostwal, chairman of Mumbai’s CNI Research, made an interesting observation – the orders amount to between 300 and 400 slots. They don’t have enough slots now, so imagine what is coming.
The 9% growth in the economy alone is taxing the state’s ability add infrastructure. Of course the state could sell airports to overseas firms, which would immediately solve part of the problem. But imagine India selling anything to “foreigners”? Not easy because these investors will not tolerate state meddling on India’s levels.
Another data point worth pondering – India has a 300 widebody fleet for 1.2bn people. China has 1,400 widebodies for 1.3bn people. You can see that Indian airlines are more focused on the future than the state. It is up to the state to catchup – fast. Can it? Note this catchup process requires not just infrastructure development, it also means providing an environment that does not over tax airlines and travel (airlines pay taxes of between 35% and 50% on fuel) and also needs to provide a banking system that can lend the airlines money to pay for the fleets. At present it is foreign banks who are funding the fleet growth and all the money leaves India to pay for the planes – not too smart.