'Rising oil prices not to impact Indian carriers' expansion'

Air passenger growth may be slower due to rising crude oil prices but there will be no impact on planned induction of planes by Indian carriers, said Boeing India president Dinesh Keskar.

The aircraft manufacturer had estimated a 15 per cent growth in passenger traffic in India in calender year 2011. Keskar stated: “We estimated this factoring the oil price at $100/barrel. However, if the price continues to stay at $120/barrel, the projected growth rate may reduce to 12 per cent.’’

Last year, domestic air traffic grew 18.5 per cent and Indian carriers flew 513 million passengers. Fuel costs account for 40 per cent of an airline’s operating expense and rising prices are a cause of concern.

No Indian carrier has sought rescheduling or deferment of existing orders, said Keskar. Air India is expected to get the first of its 27 Boeing 787 Dreamliner aircraft after October, only the second customer after All Nippon Airways. “Air India will get the first plane in the last quarter of this calender year. It will have to get its pilots and engineers trained on this aircraft by then. The plane will also require a certification from the Directorate General of Civil Aviation. We are negotiating with Air India regarding the future deliveries but it will take three-four years to deliver the remaining 26 planes,’’ he said.

Keskar said Boeing would supply two Boeing 737s to low-cost carrier SpiceJet in 2011. The Gurgaon-based carrier has 28 Boeing 737s and is adding two more planes within a month. Last November, the airline placed orders for another 30 Boeing 737s and those deliveries are to commence from 2013. “We have added 17 new flights in our summer schedule, including a new Ahmedabad-Goa route. We expect 14-15 per cent growth in passengers this year. Fuel price is a challenge for us. Airlines will have to pass a fuel price hike but I don’t see it to be a dampening effect on growth,’’ said SpiceJet’s chief commercial officer, Samyukth Sridharan.

Kotak Institutional Equities’ analyst Jasdeep Walia said in a research report earlier this week that airlines across the board had increased fares to pass on the increase in costs on account of higher fuel prices. And, that fares need to go up approximately five per cent in the first quarter of 2011-12, to pass on higher fuel costs and break even on operations.