The Hindu Business Line : Small aircraft: Big opportunity

Mr James E. Dailly, Vice-President International, Sales, Bombardier Aerospace, next to a Bombardier Q-400 aircraft at the IGI airport, New Delhi, one of the stops on the company's `roadshow' in March. Small aircraft makers are eyeing the growing market for their products in India.

THE FORAYS being made by the leading manufacturers of the small aircraft — Bombardier and Embraer — in India can be termed as the next logical step in the Indian civil aviation sector.

disposable incomes and more people opting to fly, there are many more avenuesfor aircraft manufacturers and operators.

The Government has taken some positive steps to open up the skies. Couple these with an underdeveloped market vis-à-vis the population and size of the country and the scene is set for more small-bodied aircraft to vie for Indian airspace.

The two players — Canadian aircraft manufacturer Bombardier and the Brazilian Embraer — offer other reasons as well for the need for the smaller aircraft. "People are still getting used to the idea of flying rather than travelling by surface transport. This means that filling larger aircrafts on newer routes is going to be a challenge in the first few years till the market develops. Hence, it makes sense for operators to look at smaller aircraft when they are focussed on connecting routes," the Vice-President, Marketing and Airline Analysis, Bombardier Aerospace, Regional Aircraft, Mr Barry Mackinnon, said.

The routes that the two manufacturers feel are best suited for these aircrafts are those connecting secondary cities to major centres such as Delhi and Mumbai or even linking two secondary sectors such as Cochin-Hyderabad, Hyderabad to Jaipur and Lucknow or Bangalore to Jaipur.

"Also, with the Bombardier's CRJ there is much potential for hub bypassing such as Air Sahara currently does with its Bombardier CRJ 200 aircraft," added Mr Mackinnon.

The manufacturers also believe that after the Indian government allowed private airlines to operate to the six nations making up the South Asian Association of Regional Cooperation (SAARC) another area has become viable for the small-bodied aircraft.

While the Government decision means that the private sector airline can launch flights to Sri Lanka, Nepal, Bangladesh, Maldives, Pakistan and Bhutan, it is expected that they will also be expected to fly to other parts of the globe shortly.

The manufacturers feel that their aircraft could be successfully deployed on routes such as New-Delhi-Colombo, Mumbai-Dhaka, Bangalore-Kathmandu, Hyderabad-Kuala Lumpur and Hyderabad-Singapore.

Little wonder, then, that the manufacturers are talking to several parties in India, both in the public and private sectors. "Like many other countries, it is expected that the new civil aviation policy will enable the launch of start-ups to increase regional connectivity and expansion of existing carriers — a natural fallout of which would be increase in our sales. However, based on our conservative forecast, we expect the potential is substantial if the recent trends continue," Mr Mackinnon pointed out.

Similarly, Brazilian manufacturer Embraer feels that the market is big when it comes to small-bodied aircraft. The company has estimated that over the next 20 years (2004 to 2023) there will be a demand for 480 aircraft in the Asia-Pacific region (excluding China) worth about $12 billion.

"We expect that India's demand for aircraft in these categories will be a sizeable portion of this demand," the company's Managing Director, Asia and Pacific, Civil Aircraft Market, Mr J. Bruce Peddle, said. The Bombardier representative added that "assuming that the overall fleet size expands — we expect more than 50 per cent of the new inductions to be in the regional aircraft category that will make regional aircraft account for one third of the total market."

"Today, there are regional aircraft available that boast of the lowest operating costs compared to any available aircraft. An excellent example of this is our 74-seater Q-400 aircraft which has a break-even as low as 42 per cent passenger load factor," Mr Mackinnon added.

Interestingly, the shift in focus to smaller aircraft is something that is also happening in other markets. "Even if you look at the US, where civil aviation is pretty well developed, there has been a significant shift to smaller aircraft post 9/11 because they give you greater flexibility to match demand and supply" Mr Mackinnon pointed out.

He believes that as operating costs in India are on the high side, such flexibility will improve the financial viability of airlines, especially start-ups. Echoing similar sentiments, the Embraer representative said that there are many advantages of the 170/190 series new generation aircraft over larger, narrow-bodied equipment.

"Generally, these advantages fall into two key areas — product efficiency and enhanced service levels. As the industry continues to develop in an era of low yields and rising costs, airlines are forced to become more efficient at deploying the right size aircraft for a given market. The need to match aircraft capacity to market demand more accurately is apparent. However, today, many airlines are still forced to place high-capacity aircraft on low-demand routes simply because they do not have the correct aircraft to properly service low-density markets," Mr Peddle adds.

"Embraer has been present in the Asia-Pacific region for the last five years and has always looked to India as an emerging market for our products. Our recent presence in India with the Embraer 170 was part of a 12-country, 41-airline demonstration tour of the Asia-Pacific region, where we are showcasing our new family of commercial jet aircraft. India is a natural stop for the aircraft on this tour," Mr Peddle said.

Mr Mackinnon, too, said: "Bombardier has been tracking the Indian market for a number of years. Indian civil aviation is underdeveloped compared to the size and population of the country. India's GDP is fast growing and so are the disposable incomes of the ever burgeoning middle-class. Hence, it is imminent that more and more people will fly. Also, in the last year, the Indian market has become very interesting and exciting especially after the Government's recent impetus to further liberalise civil aviation in India."