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Boeing fears India heading to overcapacity

Boeing is sounding warning bells. Indian carriers have ordered 400 aircraft, that's almost twice the number the industry now has. But can it fill the seats? Boeing fears overcapacity will spell a crash, reports CNBC-TV18.

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Boeing fears India heading to overcapacity

Every month, almost half a dozen new aircraft fly the Indian skies and that could continue over the next 3 years. India's 10 carriers have ordered about 400 aircraft worth USD 15 billion. That's adding 28% capacity a year. But passenger traffic is growing by just 18%. Boeing says such capacity growth, unseen elsewhere, can spell losses.

"One of the reasons Indian industry, particularly, today is lagging behind in my mind, is over capacity. Too many planes are coming in at short notice and while it is wonderful that India is getting all these planes, are we as manufacturers happy? We would be happier if they stay positve and not go into losses," said Dinesh Keskar, VP Sales at Boeing.

Boeing's biggest concern seems to be that Indian airlines are undercutting each other to grab market share at the cost of profitability.

"Now people are climbing in market share and fares are going down. This is an okay strategy for a few days or weeks, but it will not help them in the long run and this is what we are a little concerned about," said Dinesh Keskar, VP Sales at Boeing.

The Indian aviation industry's losses stand at an estimated Rs 150 crore, and they're mounting. That's when global carriers are taking off after the 9/11 downturn. The industry might then want to heed Boeing's warning bells, after all.