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India is a Challenging Market With Huge Sales Potential: Boeing

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(L to R) David Schulte – Managing Director of Regional Marketing at Boeing Commercial Airplanes, Ryan Weir – Vice President, Commercial Sales & Marketing, India and South Asia, Boeing Commercial Airplanes and Salil Gupte – President, Boeing India

New Delhi: “India is one of the world’s largest and fastest-growing markets, growing at about 8% annually. There is a huge sales potential in the Indian civil aviation market,” said Ryan Weir, Vice President, Commercial Sales & Marketing, India and South Asia – Boeing Commercial Airplanes, while addressing reporters at the newly inaugurated Boeing Global Support Centre in Gurugram on May 12.

Ryan Weir noted that as per the company’s outlook, India will need around 2,200 aircraft in the next 20 years, of which 1,400 are unsold. While India has an average of 2.3 crore people travelling by train and three lakh air passengers daily, a 1.5% shift from rail to air travel will double the number of air passengers. “This in combination with the growing middle class, growing GDP across the country, are real drivers for the growth for the domestic and international aviation market in India,” he said.

US aircraft maker Boeing on May 12 said that it will work with stakeholders to the best of its abilities to mitigate the issues. It may be noted that aircraft lessors’ are concerned about the National Company Law Tribunal’s (NCLT) decision to impose a moratorium on Go First assets that also bar the deregistration of planes leased by the airline in the wake of the Go First crisis. Boeing said that the crisis at Go First will not change the trajectory of the Indian civil aviation market in terms of growth and macro trends while legislative clarity on aircraft leasing aspects will provide more comfort to the lessors. India is the third largest as well as one of the fastest growing aviation markets in the world.

Responding to a query on the Go First crisis and lessors’ concerns, Weir said that working with stakeholders we will do the “best of our abilities to mitigate the issues”. “We don’t know what the impact is going to be,” he added.

Earlier this year, Boeing projected that India will require around 2,210 new planes in the next two decades and out of them, 1,983 units will be single-aisle jets. It also estimated a nearly 7 per cent annual domestic air traffic growth through 2041 for the Indian market. Boeing has significant presence in India, including in defence and civilian segments, and its annual sourcing from the country is worth more than USD 1 billion.

Addressing the reporters, Salil Gupte, President, Boeing India, said that the company has been committed to the Indian aviation industry for over seven and a half decades now, aiming to continue with the commitment. Terming the Indian market as the largest site outside the US for Boeing, he noted that for the company, India has both capability and market like no other. There is a significant growth in the Indian economy and that also drives aviation growth.

“There are structural changes as you have a rising middle class in India. You have more than 90 per cent of the population that has not flown yet. We expect them to taste flights for the first time and that will create continued demand,” he said. According to him, one of the challenges for the Indian aviation sector’s growth is about skilling and the country is projected to require 31,000 more pilots and 26,000 mechanics in the next 20 years.

India is a very competitive market and the price elasticity of demand for aviation is very sensitive in terms of price, given that many Indians still travel by train. “So, we need to ensure that pricing is competitive to attract more Indians to fly,” he noted.

Adding further, Gupte noted that while the growth in the market is tremendous, Boeing also has a huge supplier base in India. Notably, the airframer exports products and services worth $1 billion annually, contributing to about two-thirds of the company’s global manufacturing. Every single Boeing airplane has some parts manufactured in India.

“A significant amount of engineering that we do in India, whether it’s customer configuration engineering, support for flight tests or design engineering, much of the work is done in our engineering centres in Bangalore and Chennai,” he added. However, while the exports of products and services for the company from India are high, the Boeing India President stated that as far as the final assembly of the aircraft is concerned, it will take some time before the country, along with the nearby markets reach a certain threshold for aircraft requirement. He also said the final assembly line for defence aircraft is different from that for civil planes.

Answering a question related to insolvency proceedings being initiated against cash-strapped Go First, Salil Gupte said it is never a positive when an airline runs into financial challenges because it takes a toll on the management, employees, all stakeholders and also puts a strain on the overall transport infrastructure. He was confident that growth will continue despite the Go First crisis and the bullish outlook for the country’s aviation market remains positive.

When asked what needs to be done to address the concerns of the lessors, Gupte said that legislative clarity on leased aircraft in the context of Cape Town Convention will provide more comfort to the lessors.

“The key concern that lessors have is about the liquidity of their assets. They look at risk. They really want to make sure that their assets are accessible. Aeroplanes are really expensive assets.

“India has acceded to the Cape Town Convention that oversees how assets are traded globally… There is some legislation on the table that will provide clarity in India on how these assets will be handled going forward,” he said. According to him, passing that legislation will be one of the clearest things India can do to provide more comfort to the lessors and remove the challenges that they face in these type of situations.

“If India does that, you will see some of the issues raised by the lessors in the past few days will go away,” Gupte said.

In India, Boeing boasts of 5,000 members and another 13,000 people associated with the company through its supplier base of 300 members, of which 75 of them are MSMEs. The new global support centre in India is an addition to the India team. Situated at a strategic location close to the customers, the centre aims to provide customised operational efficiency and safety improvement projects for its airline customers, civil aviation regulatory bodies and other industry stakeholders.

Ryan Weir noted that in addition to bringing in the sales and marketing team to the new centre that will manage both the product and services side, the aim is to bring at least 20 of the flight operations engineers and maintenance engineers to support the customers.

“We want to support our customers in India. Typically we’ve supported customers either based out of Seattle or from Singapore. This new centre is an important step of getting the support system in the country closer to the customers, making sure that we’re doing everything we can to support efficient, profitable operations for the airline,” the vice president added.

In addition to supporting the customers, the members at the new centre will also partner with the Ministry of Civil Aviation (MoCA) and the Directorate General of Civil Aviation (DGCA) to take up initiatives that are important to the customers and advance those to make this whole industry gets even better, he added.

Notably, Boeing received a huge order from Air India this February for 190 737 MAX, 20 787 Dreamliner and ten 777X airplanes with 50 additional 737 MAXs and 20 787-9s. Earlier, Akasa Air placed an order for 72 737 Max aircraft. About Boeing 777X aircraft, officials said the first delivery is expected in 2025 and acknowledged that there are a few launch customers without providing the specific details.

“We are very proud about the work Indian teams are doing (regarding 777X)… every single 777X is going to have a little bit of India in it,” Gupte said, adding that every single Boeing plane has some manufacturing that is done in India.

The order book is a major reason for Boeing to set up its global support centre in India, Weir noted and added that more than sales, it’s more about setting up the infrastructure for the aircraft that the two airlines have ordered and ensuring those aeroplanes are delivered and deployed efficiently within the country. The new centre will be crucial in collaborating with the stakeholders to identify and work on the solution as the number of aircraft increases.

Dave Schulte, Managing Director of Regional Marketing at Boeing Commercial Airplanes, said that while the Indian market is seeing unprecedented growth in the aviation space along with other South-East Asian markets, including Indonesia, Vietnam, Thailand and Malaysia. However, he noted that India is still the third-largest aviation market and will remain so for the foreseeable future. The aircraft maker Boeing is “bullish” on the Indian market, which also has some “unique challenges”.

Acknowledging the high growth rate and market opportunities in the country, Schulte said that India is also one of the challenging markets and there are three major concerns for the Indian aviation market, including high fuel prices. He noted that while globally, aviation fuel prices have fallen by 30%, in India, they have gone up b 11%. Additionally, India is a very price-sensitive market, making it difficult for airlines to operate in India. “While there has been a lot of discussions around the rising air ticket fares in India, we feel it’s good for the health of the local aviation market,” he added.

According to Dave Schulte, another key challenge for the market is the transaction in USD as about 70% of the transactions are carried out in USD. Therefore, the fluctuating conversation rates and the rising rates add to the cost of operations, he added. “So highest costs, lowest fares, it is a very challenging market. There will be ups and downs… It is the third largest aviation market in the world and we are bullish on the market,” he said.