'India fastest growing but also one of the most challenging civil aviation markets; should give lessors' more comfort,' says Boeing

NEW DELHI: US aerospace major Boeing has requested India to "fully ratify" the Cape Town Convention (CTC) which allows lessors' to easily repossess their aircraft from defaulting on rentals and defunct airlines. Boeing India president Salil Gupte said here Friday that once that happens, "lessors will get more comfort. We are trying to mitigate CTC concerns (for India) by pushing for full ratification to happen here. We encourage the aviation ministry to progress that legislation and help resolve this situation (lessors' distrust)."

NCLT granting Go First's plea for voluntary insolvency has given the airline protection from assets in its possession - like aircraft and airport slots - being taken away for at least six months. Lessors had last week applied to get 45 of Go First's 54 de-registered so that they could repossess them but now the same can't happen, sparking concerns in the leasing industry for India. While India is a signatory to the Cape Town Convention, the bankruptcy law takes precedence over the same.

This is not the only challenge seen in the world's fastest growing aviation market that is plagued by very high operating costs for airlines, thereby having leading to few financially viable or well-capitalised carriers.

Boeing MD (marketing) David Schulte said: "India is one of the most challenging markets for civil aviation. There are three main challenges." First, he said is the "highest cost of jet fuel" (globally) for domestic flights. "Globally this has fallen by 30% (following drop in crude prices) but here it is 11% more expensive." Second is the fact that almost 70% of airlines' operating costs are dollar-denominated. With the dollar appreciating, costs go up. "And finally India has the lowest fares. So on one hand you have highest cost, and on the other lowest fares," Schulte said.

Despite these challenges, India's growth story makes it a very attractive market for aviation stakeholders. Salil Gupte said: "India is the fastest (aviation) growth market and that is the ultimate driver for us. Every year we export $1 billion products and services from India. Boeing directly employs 5,000 people here and an additional 13,000 work in our 300 supply chain partners. India is Boeing's second largest base outside of the US."

The in-the-works Boeing 777X - whose delivery is scheduled to begin in 2025 and which has been ordered by Air India - is seeing a lot of support from India. "There is a little bit of India in every B777X. Our engineering units in Bengaluru and Chennai are supporting that programme majorly. They are playing a key role in the flight test programme of this aircraft," Gupte said. India will require 31,000 and 26,000 technicians over the next two decades.


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