Govt mulls allowing airlines pool aircraft orders

The move will help domestic airlines negotiate better terms with aircraft makers and bring down overall associated costs

The civil aviation ministry is likely to allow domestic airlines to pool their orders to purchase aircraft. This would reduce costs for carriers because it would help them negotiate better terms with aircraft manufacturers and bring down the overall associated costs.

“It is a good idea, where airlines can come together and place their orders for aircraft,” said a senior official with the aviation ministry. He added that the matter was being discussed with the carriers and International Air Transport Association, among others.

The ministry is looking at various possibilities to reduce the costs incurred by domestic carriers while buying planes.

“India missed the offsets bus. We bought billions worth of commercial aircraft and military products from leading countries over the past six decades, but negotiated the offsets piecemeal. Ideally, we should have pooled the orders and then negotiated with the global giants to set up compete assembly lines here rather than ordering a few non-sensitive components from Indian suppliers in the name of offsets,” said Amber Dubey, partner and India head of aerospace and defence at KPMG.

He said China has a system of pooling aircraft orders and it also has a A320 assembly line in Tianjin. “The eco-system created at Tianjin, Harbin and Beijing is a win-win for both China and France. It’s time for India to wake up and ask for its due, given the huge orders that we are going to give out - both on the commercial and military side,” Dubey added.

Leading aircraft makers Airbus and Boeing have projected increased demand from India for new aircraft in the coming decades.

Last month, Airbus had said the growing passenger traffic in India and other emerging markets would help generate aircraft demand worth $5 trillion in 20 years.

In its recent report, aviation think tank Centre for Asia Pacific Aviation  had said the past few years had been some of the most challenging in India's aviation history.

“Over-capacity, high input costs, intense competition, and a negative policy and regulatory environment conspired to threaten the viability of virtually the entire aviation value chain,” it had said.