Hike air fares to break even: Boeing to Indian carriers

Shivani Muthanna, CNBC-TV18

Aircraft manufacturer Boeing Company is bullish on demand for aircraft in India and is advocating airlines to hike fares.

Well, Boeing has forecasted a 10% increase in demand for aircraft compared to last year. Jet, Indian and SpiceJet as well as the Indian army will require 1001 aircraft by 2027 that will be worth more than a USD 105 billion. For the  next one year, Boeing advocates a further 25% to 40% hike in air fares for Indian carriers to break even and cover their losses.

Increase fares further and cut down capacity - that seems to be the dictat Seattle-based aircraft manufacturer  - the Boeing Company is giving to airlines in India if they hope to break even.

Dinesh Keskar, Senior VP - Sales at Boeing Commercial Airplanes, said, "For the next 10 months we are very lean so we feel fortunate that we are not contributing to the overcapacity problem in India and making it worse.  We are giving airlines a chance to match supply and demand  - so that fares can reach a level where they can break even if not make money."

The average fare on the most popular Delhi - Mumbai route is currently at USD 121 or Rs 5,093 of which the fuel surcharge is at USD 71. But at the current industry passenger load factor of 60 - 62%, the air fare should ideally be USD 154 or Rs 6,500.

Indian carriers have already cut capacity by 10% - 15% in the past two months. But industry experts say only another 15% reduction in flight frequency will be able to create a supply - demand match in the bleeding aviation space.