June 17, 2007

Paris air show to see few Indian orders as budget carriers struggle - analysts

MUMBAI (XFN-ASIA) - Airlines from India, among the fastest growing by passenger volume in the world, will be wooed by aircraft manufacturers at the Paris Air Show this week but are unlikely to be major buyers as budget carriers struggle to manage costs and move to profitability, analysts said.

India's airlines lost a total of 400 mln usd in the nine months ended December 2006 as high fuel and aircraft purchase costs hit carriers, experts told an aviation conference earlier this year.

But full-service Indian carrier Kingfisher Airlines is expected to place orders as it prepares to expand into budget services in India and fly to international destinations as well, said Amar Kedia, aviation analyst with brokerage Mumbai-based ICICI-Securities.

"We will be surprised if Kingfisher does not order more wide-bodied aircraft for their international operations," Kedia said.

"They do have aggressive international plans."

Kingfisher Airlines chief executive Vijay Mallya was quoted as saying on the sidelines of IATA's annual meeting in Vancouver in early June that the company will announce a new aircraft order with European manufacturer Airbus.

Kingfisher has already ordered Airbus's A340-500s that can directly serve the US West Coast. In 2005, Kingfisher ordered 15 Airbus aircraft: five of the new superjumbo A380, five of the future A350 and five A330s.

Its A380 delivery was delayed and is now expected in 2011.

"Kingfisher could look for Airbus planes, likely jumbo A340-600s, for non-stop connectivity (between India and the US)," said Gautam Roy, airline analyst with brokerage Edelweiss Capital.

In addition Mallya's UB Group, the parent of Kingfisher, last month bought a 26 pct stake in Indian budget airline Air Deccan, throwing a lifeline to the loss-making carrier and enabling both airlines to trim costs and share resources.

The world's biggest civilian aircraft manufacturers, Boeing Co and Airbus, announced new business worth 48 bln usd at the last Paris show in 2005 with India a major buyer.

In 2005, budget carrier Indigo ordered 100 A320 planes from Airbus worth about 6 bln usd while full-service Jet Airways bought 10 A330 airliners for around 1.65 bln usd.

But new orders are not likely by many of the other carriers including state-owned domestic airline Indian and international flag-carrier Air India which have already made purchases since the last show.

In January 2006, Air India signed an agreement to buy 68 Boeing jets for around 11 bln usd to upgrade its ageing fleet, marking the biggest deal in Indian aviation history.
In 2005, Indian Airlines ordered 20 Airbus A-319s, 19 A-321s and four A-320s in a deal worth 2.2 bln usd.

The more from the source at: Interactive Investor

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