The Hindu Business Line : Airline industry facing shortage of new generation aircraft

"There is acute shortage of new generation aircraft," Mr Ajay Singh, Director of the soon-to-be launched low-cost airline, SpiceJet, told Business Line. The rise in leasing charges has been attributed to increase in traffic levels in Asia and rise in low-cost airlines.

According to Mr Kapil Kaul, Chief Executive Officer (India and West Asia) of the Centre for Asia-Pacific Aviation (CAPA), the sudden shortage of new generation aircraft for leasing, especially the 737-800s and A320s is a worrying factor for the industry. "Lease charges have been going up by 15 per cent to 20 per cent," Mr Kaul said.

He said the lease charges of a 737-700s and 800s and range between $2,75,000 and $3,00,000 per month. According to CAPA, India will have around 400 commercial planes by 2010 compared with 175 currently. Within the next two years, the country will have 100 more planes. This year alone we will see airlines placing orders worth $10 billion from Airbus and Boeing. This is nearly one-third of the total number of aircraft sales worldwide.

This will also see India rise to the third position after the US and China in the number of aircraft purchases by all countries.

An industry analyst pointed out that two years ago, airlines were trying to cut costs and run a tight ship but with rise in passenger traffic, they are looking at taking more aircraft on lease. "As of now, they are being cautious. Once they are confident that the boom will last for a longer time, they will start placing orders for buying aircraft," an analyst said.

Airline industry analysts said with the Government extending the exemption of paying withholding tax of 20 per cent up to September, there will be a huge rush to tie-up deals for getting aircraft on lease. This would directly result in a dearth of aircraft and because of the increasing demand, lease charges would go up further.

Mr Singh said: "I think lease charges depend on whether the demand is more or less at a particular point of time."

But, most of the airline industry leaders said the Government should have extended the exemption by one more year. "All the airlines would have got aircraft at reasonable leasing rates and would have got enough time to tie up leasing arrangements," said Capt. G.R. Gopinath, Managing Director of Air Deccan.

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