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Fri, Sep 01, 2006

Boeing Exec Warns Of Potential Troubles In India's Av Sector

Announcement Tempers Optimism

Just the other day... Aero-News reported on Boeing's decision to build a maintenance facility in central India. At that time, Boeing said it foresees the need for more than 850 new commercial aircraft in India over the next 20 years.

So why, then, is Boeing suddenly worried about the financial well-being of the commercial aviation industry in India?

"The losses in the Indian aviation industry is a cause for concern. It needs to be checked otherwise that will be a potential disaster for the industry," Boeing's senior vice president of commercial plane sales in the region, Dinesh Keskar, told the Press Trust of India.

Warning about a possible disaster in the making, Boeing says low-cost carriers are cutting it too close. The fares charged by LCCs, combined with the rising cost of fuel, mean even though they're flying record numbers of passengers... the LCCs are losing money.

The losses are spread across the board -- from Air Deccan, to SpiceJet, to Jet Air.

"In the next 12 months there could be consolidation," Keskar said. "They have to increase fuel surcharges and look at ways of selling seats at differential prices so that low yields from cheaper ones could be offset by those from the higher priced seats," he said.

Boeing -- perhaps concerned about losing potential customers -- has gone on the offensive -- by stating either fares need to go up... or else there will be a consolidation in the Indian marketplace. And that wouldn't bode well for Boeing's substantial order book in the region.

Despite the warning, however, Keskar still managed to sound optimistic.

"Boeing forecasts a long term requirement for increased passenger traffic in which airlines significantly add frequencies with smaller aircraft to meet demands," Keskar said. "We also see a considerable increase in the air freight market that will need to support the country's exports, which are growing at an estimated 5-6 percent a year for the next 20 years."

We'll see.



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