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updated: 8/28/2014 9:17 AM

Boeing, Airbus vie for $2 billion order from India's Air One

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  • At list prices, 20 Boeing 737-900ERs cost $1.98 billion, although airlines typically get discounts.

    At list prices, 20 Boeing 737-900ERs cost $1.98 billion, although airlines typically get discounts.
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Bloomberg News

India's Air One Aviation Pvt. is seeking $2 billion of jets to take on Singapore Airlines Ltd.'s venture in the country, stoking competition in a market where carriers lost almost $10 billion in seven years.

Air One, among six companies that last month got initial approval to start airlines in India, is looking at Airbus Group NV's A320s and Boeing Co.'s 737s, its director Alok Sharma said in an interview yesterday. At list prices, 20 Boeing 737-900ERs cost $1.98 billion, although airlines typically get discounts.

"You can't start with one plane and wait for another six months to get the next one," Sharma said in his office near New Delhi's airport, adding Air One plans to provide full-service flights from mid-2015. "The launch will be decided by availability of aircraft in a contiguous manner."

Sharma, undeterred by one of the world's costliest aviation markets, said he sees growing demand for air travel and reduced capacity because some airlines in India are struggling. Singapore Airlines -- partnering with the Tata Group -- plans to fly its full-service Indian venture Vistara this year. AirAsia (India) Pvt. began operating a low-cost carrier in June.

"New players will have to choose their positioning, network, fleet rollout and cost structure very carefully," said Amber Dubey, partner and India head of aerospace and defense at KPMG. "Incumbent airlines will have to guard their territory."

Sharma, who ran Sahara Airlines before it was sold to Jet Airways (India) Ltd. in 2007, said his experience in Indian aviation gives him an edge as he charts a path to profit. Air One currently offers charter services.

Boeing India declined to comment on the potential order from Air One. An Airbus spokesman in New Delhi didn't answer two calls to his mobile phone.

A320s identified by Air One earlier were snapped up by Tata-SIA Airlines Ltd., Sharma said.

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Vistara is leasing 20 A320 planes from BOC Aviation Pte, the Singapore-based aircraft leasing unit of Bank of China Ltd. Vistara plans to start a premium carrier which will take on state-run Air India Ltd. and Jet Airways, which recently said it will scrap its low-cost venture.

"The beauty of BOC was they had very good 20 positions, which any airline will take and run with," Sharma said. "There are no such positions available with a single lessor now, but it's just a matter of mapping."

Air One plans to induct six to seven aircraft every year, and has yet to decide on the routes, Sharma said.

The business travel market in the $1.9 trillion economy is Asia's fastest growing and projected to double by 2015, according to the Global Business Travel Association. The entry of new carriers would mean innovative offerings and new routes, said Dubey, of KPMG.

Indian carriers have lost a combined 594 billion rupees ($9.8 billion) over the past seven years, the Sydney-based consultancy CAPA Centre for Aviation estimated in May. Over that period, airlines lost an average $22 every time a passenger stepped on board, according to CAPA.

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