India will be the next growth engine of global aviation with Indian carriers expected to place orders for 1,500-1,700 aircraft over the next 24 months, said Centre for Asia Pacific Aviation India (CAPA India), a specialist in aviation advisory and research.

At present, the market remains under-penetrated. The total commercial Indian fleet of around 700 aircraft is smaller than some of the world’s largest individual airlines. Indian carriers have just under 800 aircraft on the order of which IndiGo accounts for 500, which would increase to close to 1,300 if Air India order materialises as expected.

Air India is expected to make the first move, with reports that it will shortly place a historic order for close to 500 aircraft - split between Airbus and Boeing - thus marking a genuine turning point in Indian aviation. This could be the largest order in global aviation history, in terms of both the number and value of aircraft, which are expected to include a mix from the A320neo and 737 MAX familines, and widebody equipment.

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Unfulfilled orders

In recent months, there have been numerous cases of aircraft deliveries being delayed where the airframe was ready but engines were not available due to supply chain issues. The incidence of such cases is expected to ease by the end of FY24.

Even once supply-chain challenges are resolved, aircraft and engine OEMs face a very significant backlog of orders that could take years to address. Both Airbus and Boeing combined had 12,669 unfulfilled orders as on December 31, 2022. Delivery slots are very hard to come by for at least the next couple of years, while for narrow bodies, the situation is reportedly tight until 2029, CAPA said.

The agency said that, to secure timely delivery slots to support their growth plans, Indian carriers like Akasa and Go First need to place scale bets by entering into new orders with a sense of urgency. SpiceJet will need to actualise its current order and prepare for further expansion. And even Air India will need to place another large order relatively soon.

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CAPA said that due to pressure of orders relative to production challenges resulting from supply chain and other issues, the pricing that can be negotiated may not be as attractive as it has been in the past, especially from engine OEMs. Indian carriers may find that costs of aircraft and engine acquisitions, as well as after-market services may be higher than expected.

Ordering aircraft is a relatively easier task. Far more challenging is to prepare the entire aviation ecosystem to be able to absorb those aircraft. Aside from aircraft that are being ordered, growth is also expected to come from increased leasing of equipment especially in FY24.

The industry should not be caught off-guard by the influx of capacity, as happened in FY06-FY08 when aircraft were grounded due to a shortage of crew, or during FY15-FY19 when sustained year-on-year growth of close to 20 per cent challenged the entire aviation system.

India is, perhaps, on the cusp of a long-awaited and historic change. The Ministry of Civil Aviation is already taking steps in line with this, with positive development visible in all key areas, but a step-change is required across the industry, CAPA said.