Aviation policy, a boost for aircraft leasing cos

It won’t be easy for airlines to acquire aircraft from manufacturers at a short notice and hence they will have to take the leasing route.

Bengaluru, June 17





The New Civil Aviation Policy (NCAP), unveiled earlier this week, is expected to boost the acquisition of aircraft at a faster pace while leasing companies will be the major beneficiary of the sudden windfall from the airlines.

Analysts say that on a yearly basis, domestic airlines might require 40-50 aircraft. Vistara as well as AirAsiaIndia have already said that they will increase the pace of acquisition of aircraft.

Boeing, a leading manufacturer of commercial jets, is expected to release its 2016 market outlook for India’s commercial aviation market in July. This annual forecast will take into consideration many factors, including the country’s aviation policies, Joanna Pickup, a spokesperson for Asia Pacific & India Communications, Boeing Commercial Airplanes, told BusinessLine.

At present, all Indian carriers put together have about 400 aircraft in their fleets. “At the current rate, we expect the number of aircraft to double every five-six years,” said Amber Dubey of KPMG. However, it won’t be easy for airlines to acquire aircraft at a short notice and hence they will have to take the leasing route. President for Airbus Division in India, Srinivasan Dwarakanath, told BusinessLine that the company usually sticks to its overall plans. “Our delivery planning is worked out years in advance and while we have an active order/delivery management, we stick to our overall plans,” he said.

He, nevertheless, lauded the NCAP, saying it is “pro-flyers and focused on regional connectivity and development of aviation related infrastructure.” It will support the growth of the sector, he added.

Older aircraft

This could lead to airlines turning to lease older aircraft to scale up their fleet size. According to leasing company Avibroker, a 1996/97 A320 aircraft can be dry leased at the current rate of $160,000 per month while a 2005/06 A320 can be bought for $32.5 million. A Boeing B737-300 of 1996 vintage can be dry leased for about $91,500 a month, says Avibroker’s website.

But an analyst with another global consultancy said that to boost regional connectivity, airlines might go for a smaller aircraft than the A320. “It all depends on how they rejig their fleet composition, which they will have to do now,” she said.

Market forecast

With the unveiling of the NCAP, some of the aircraft manufacturers said there will not be immediate revision in market forecast. “Our market forecast is revised on yearly basis depending on many factors including global economic growth. We don’t revise the forecast based on developments in one region of the world,” Dwarkanath said. Airbus has delivered 221 aircraft to various airlines in the country while there is a backlog of 525 aircraft.

Pickup of Boeing said the company has a diligent process in place to work to with their customers to meet their current and future fleet requirements.

Boeing has orders for 340 aircraft from Indian carriers at present.

Published on June 17, 2016

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