Wednesday, October 4, 2023

Justifying Mega Purchases Will Be A Tough Task

By Bikram Vohra

Bikram Vohra, Consulting Editor, IADB

Hold your horses. With a combined order of over 1400 aircraft in the past six months, Air India and Indigo have raised the bar very high and, with it, the stakes. Both must have done their homework before the grandstand pronouncements, and their projections for the next fifteen years would seem solid. 

As the Minister of Civil Aviation said in an expression of unbridled enthusiasm, “Every dollar invested in civil aviation yields $3.1 in terms of new growth, as well as the employment multiplier. Every direct job in civil aviation results in 6.1 indirect jobs in the sector. And therefore, there are tremendous dividends that accrue from an ever-expanding civil aviation sector.” On paper, Scindia is spot on.

In brief, we are looking at tens of thousands of jobs in the related sectors as the ripple effect is incalculable. Add on dependent family members, and the boom could impact ten million individuals directly.

We look in the capsule at the flight deck crew, and one would need at least 10,000 more seeing as how IndiGo has 3000 pilots for its 300 planes even after accounting for replacement aircraft from the new order. Air India will have to look at 5000 pilots and more.

We are looking at 75,000 in-flight cabin crew. 

Then there is engineering, aircraft maintenance, hangar maintenance, a huge boost for a still nascent MRO category, staffing for fuel silos, vehicular staff, ground staff, a massive catering and delivery infrastructure, ATC upgrading, runway maintenance, communications and avionics, duty-free and high street shopping, transmodal networks, safety, security, baggage transfers, the whole cargo set up, the list is endless.

They all need institutions for training.

In a perfect world, the big buys make for a perfect story. But Murphy’s law has a habit of messing things up a bit.

The one flaw in this gigantic commitment is that both airlines are vying for the same market segment. This could result in severe disappointment if the projected passenger rise fails to keep its speed.

Duplication is very much on the cards.

Then again, if the infrastructure lags behind, it could call for a revaluation of the number of orders.

The Udan initiative of opening up the interior and creating a regional connectivity grid will need huge public support to be financially viable if the 320/737 families at 170 capacity are going to be the favoured aircraft on less than 60-minute routes.

The bookends of time wasted in point-to-point flights of short duration through just waiting suggests a three ride on a train or bus would be shorter.

Smaller planes, maybe more frequency would have been more in order.

So flying global sounds good, but slots do not come with the purchase. Who is giving you slots at top airports?

No one. 

While one understands the need to make waves at airshows and garner headlines and get dollops of publicity for free, the bottom line is arrived at when it is payment time and a 50 billion dollar deal needs a lot of flying passengers.

To risk so much on that premises could either pay off big time or crumble like a wet cookie.

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