As a populous giant where economic growth and competition promise to unleash a boom in air travel, "India is the new China," in the words...
As a populous giant where economic growth and competition promise to unleash a boom in air travel, “India is the new China,” in the words of one analyst.
Based on both cold calculation and close personal relationships, Dinesh Keskar, Boeing’s sales chief for India, thinks his company can win big in this dynamic market.
The largest commercial-airplane order ever placed from India will be awarded shortly, and Keskar is confident Boeing is poised to win the first segment — a deal for 23 planes and options totaling $5 billion at list prices.
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The latest success for Keskar, 50, a native of Rajkot, India, and an engineering graduate of U.S. universities, will be today when Air India Express, the low-cost regional offshoot of the government-owned national flag carrier, takes delivery of a 737-800 at Boeing Field.
Last Thursday, during a long conversation in his Renton office, Keskar paused to take a call from a pilot with JetAirways, India’s premier privately owned airline, in town to pick up another 737-800 that day
Nine new jets will take off from Boeing Field bound for India in the first five months of this year.
That’s just the beginning of a boom, and Boeing’s biggest handicap may be not having enough of the right jets available when the market wants them.
The Indian government is liberalizing aviation regulation and moving to rapidly upgrade airport infrastructure.
Indian airlines old and new are shopping for jets.
In his newsletter to clients last month, industry analyst Richard Aboulafia of the Teal Group, just back from a vacation in India, wrote effusively of the burgeoning airline market there.
“In terms of new aircraft demand, India is the new China,” he wrote. “The Dead Hand of The State is quickly loosening its grip on India’s civil aviation industry.”
Air travel in India grew 20 percent last year. At the air show in Bangalore this month, both Boeing and Airbus said they had underestimated growth for this nation whose middle-class population now numbers some 250 million people.
The emerging low-cost carriers offer air travel for the cost of a first-class rail ticket, cutting a one-day train journey from Bangalore to Delhi to a 2-½-hour flight.
Every year in India, 15 million people travel by plane. But an equal number travel by train every day.
“A small percentage of that [train traffic] going into airplanes is just going to phenomenally increase the growth,” said Keskar.
At the air show, Keskar upped his 20-year market forecast for India aircraft purchases from $25 billion to $35 billion.
He’s convinced Boeing can build upon its customer base of flag carrier Air India, upscale JetAirways and Air Sahara, another successful private airline.
Within the next month, Keskar predicted, Air India will choose between Boeing and Airbus in placing an order for 35 wide-body jets and options for 15 more.
Of that 50-plane total, he is confident Boeing’s 777 jet will beat out the Airbus A340 in an order for 23 large wide-bodies, a slice worth almost $5 billion at list prices, including options
One good sign for Boeing: To fill its immediate needs, Air India has leased three used 777s once owned by United.
The remaining slice of the expected order, for 27 midsize wide-bodies worth around $3 billion, will go to either Boeing’s new 787 or the Airbus A330.
Because the 787’s early production slots are filled, the jet won’t be available to any new buyers until 2009 at the earliest.
That might be too long a wait for the superheated Indian market. The competing A330 is available now. Boeing is offering to find some used aircraft to bridge the gap to 2009.
Boeing must also overcome a likely price advantage to Airbus. The new 787 will certainly be more expensive than the A330, which will become obsolete by 2010 if Airbus launches the improved A350 derivative as a rival to Boeing’s new jet.
The 777 is widely regarded as a better plane but a more expensive one than the A340.
Keskar puts his faith in the technocrats of the new India, who he believes will crunch all the data before deciding, not just on price but also lifetime fuel and maintenance savings and more revenue from more seats.
“They analyze everything to death,” he said. “Having a low price is not necessarily a selling point in India.”
Airbus has an established position with the national domestic and regional carrier, Indian Airlines. In addition to vying for the big Air India prize, it is adding new startup airlines to its customer list.
It has won orders from low-cost carriers Deccan, which has three jets in service, and Kingfisher, which will begin service in May.
Boeing’s low-cost customers are Air India Express and a new order from startup SpiceJet.
Until recently, the bureaucratic “Dead Hand” cited by Aboulafia meant that while state-owned carriers Air India and Indian Airlines enjoyed monopolies, they were deprived of the means to compete.
Denied permission to augment its small fleet of less-modern airplanes, Air India, the international carrier, lost market share to big foreign competitors such as Singapore Airlines, British Airways, Lufthansa and Mideast and Asian carriers.
In 1990, Air India carried 40 percent of all air traffic in and out of India. Today, it carries 18 percent.
Indian Airlines, the domestic and regional carrier, has been waiting for government approval of its 43 Airbus single-aisle jet order for three years. The Indian Cabinet may finally give its nod at the same time as the forthcoming wide-body order.
Times are changing, however.
The government is considering privatizing the airports at Delhi and Mumbai and has encouraged new private airports in Cochin, an industrial center, and in the high-tech centers of Bangalore and Hyderabad, where a whole new class of young high-tech workers has plenty of discretionary income
And as the low-cost operators spur narrow-body jet sales, new bilateral agreements between India and other nations, including the U.S. and the U.K., are rapidly expanding international routes, creating the appetite for big wide-body jets.
Jet and Sahara, both with all-Boeing, narrow-body jet fleets, are each primed to expand internationally.
Jet, the most successful private airline in India, with a reputation for first-class service, has been granted new flights to London and to New York.
In an initial public offering that began Friday, Naresh Goyal, Jet’s sole owner, is selling 20 percent to raise money for future purchases. The IPO already is oversubscribed.
David Velupillai, an Airbus spokesman for the India region, said Boeing should not consider Jet an exclusive customer. When Jet goes shopping for wide-bodies, he said, it will be an open competition, little affected by the fact the airline owns Boeing narrow-bodies.
Boeing’s Keskar shook off this suggestion with an aura of certainty, saying he expects Jet to place a wide-body order this year.
Does he have grounds to hope Jet will remain an all-Boeing customer?
“I don’t hope,” he responded, “I know for sure that’s the way it’s going to be.”
“Naresh Goyal is the decision maker,” said Keskar. “This guy has worked with us day in and day out for the last 12 years. And he is my closest friend.”
Dominic Gates: 206-464-2963 or email@example.com