Thursday, January 26, 2012

Indian airlines, private operators likely to add 1,000 aircraft

Indian airlines and private non-scheduled air operators are together likely to add around 1,000 aircraft and 250 helicopters over the next five years, according to Planning Commission estimates.

While the scheduled airlines are likely to add around 370 aircraft in their fleet, non-scheduled operators could induct 300 business jets, 300 small planes and 250 helicopters during this period, owing to heightened demand.

A working group set up by the plan body to formulate the 12th Plan for the civil aviation sector said the Indian carriers were anticipating a significant growth in air traffic, which is leading them to add around 370 aircraft worth about Rs 150,000 crore.

"Fleet expansion at this scale would require airlines to explore multiple funding options including capital markets, long-term borrowings and leasing," the group has said.

Going by a KPMG report which estimated fleet expansion by the Indian airlines, the plan panel group said Jet Airways was expected to add 79 planes by 2017, Kingfisher 78, IndiGo 69, SpiceJet 68, Air India 40, GoAir 22 and JetLite 20.

The estimated value of these 376 aircraft was Rs 147,600 crore, it said.

The working group estimates that over Rs 20,000 crore would be invested in general aviation till 2017, with private non-scheduled operators expected to add 600 small aircraft and business jets and about 250 helicopters.

To finance their aircraft acquisition plans, airlines were resorting to multiple methods like direct lending, operational lease, finance lease and sale-and-leaseback. The last option has lately become popular as "it allows airlines to optimise their cash flow", the Planning Commission group said.

Leaseback is a financial transaction where one sells an asset and leases it back for a long-term. Therefore, one continues to be able to use the asset but no longer owns it. Leaseback is very often used in commercial aviation to essentially take back the cash invested in assets.

The group has estimated that the Indian airline industry would suffer a huge debt burden of USD 20 billion in 2011-12 and recommended "significant and continuous investment" to give a boost to the cash-strapped sector.

It also pointed out that the industry faced "many taxes" like those on fuel, aircraft leases, airport charges, air passenger tickets, air navigation service charges, maintenance costs, fuel throughput fees and other such charges.

Identifying some 'key enablers' which would be required to achieve the projected growth in the civil aviation sector over the 12th five-year plan period, the plan body recommended rationalization of taxes on jet fuel and investment by foreign airlines in Indian carriers.

Other 'key enablers' include steps to help Indian carriers reach foreign skies and expand international operations, thrust on technology and innovation and granting support to the airlines to provide connectivity to Tier-II and Tier-III cities.

It proposed a projected total outlay for the sector at over Rs54,743 crore for the entire plan period of 2012-17, including Rs32,963.67 crore for Air India and Rs 17,500 crore for the Airports Authority of India.

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