Interference Scuttles Airlines’ Fleet Growth

AIN Air Transport Perspective » February 18, 2013
Indigo wants to import 16 more A320s, but India's arcraft acquisition committee has issued clearance for only five.
February 18, 2013, 4:15 PM

India’s fastest growing and most successful airline–budget carrier IndiGo–has become the first victim of an October ruling by the country’s aircraft acquisition committee governing the number and kind of aircraft imported by airlines to encourage regional connectivity to smaller towns. In November, the committee, led by civil aviation minister Ajit Singh, cleared for import only five of the 16 Airbus A320-series aircraft Indigo wanted to acquire.

“We know that operating an airline is a costly affair,” Singh said last month, “so [airlines] want to have only one type of aircraft as it reduces the operational costs. Hence, they need to be encouraged to also acquire smaller aircraft to fly to tier-two and tier-three cities.”

Indigo president Aditya Ghosh denied reports of plans to start a regional operation with 20 ATRs in response to the ruling, however. “The news is false and no discussions [are on] with any OEM,” he told AIN.

The airline operates a fleet of 63 A320s and plans to add three more by the end of March. IndiGo holds firm orders for 280 airplanes scheduled for delivery into 2026.

Under the current tax code, airlines operating aircraft with seating capacity for up to 70 passengers pay a uniform sales tax rate of 4 percent for jet fuel. The formula hasn’t encouraged airlines like GoAir and IndiGo to change their fleet plans, however. Meanwhile, budget airline SpiceJet already flies 15 Bombardier Q400 turboprops, while Jet Airways operates some 15 ATR 72s, some on the way to retirement. Jet plans to take five of the new ATR 72-600 series for the less congested routes and smaller runways of so-called tier-two and tier-three cities.

The new policy has drawn the attention of regional aircraft OEMs. “With the domestic market growing, we will market the Sukhoi Superjet in India,” Mikhail Pogosyan, president of Russia’s United Aircraft, recently told AIN at the Aero India show. “We are speaking to Air India and GoAir at the moment.”

Cynical about the government’s motives, some advocates for the airlines worry about the ruling’s effect on competition and the health of India’s air transport industry, however.

“The government’s interference by bringing in undue bureaucratic hurdles in a system that moved smoothly will slow down growth,” one analyst said. “Air fares are already hitting the roof, with Kingfisher pulling out capacity. As a result, people are traveling less by air. This is just a ploy to show the government cares to the regional masses since elections are drawing closer.”

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