India is the highest growth market in world; seeing double digit growth here: Boeing

Boeing is betting big on India. In an exclusive conversation, CNBC-TV18's Shereen Bhan caught up with Dinesh Keskar, Senior VP, Asia Pacific & India Sales of Boeing Commercial Airplanes and began by asking him on their India outlook.

Below is the verbatim transcript of the interview.

Q: That is your market outlook, 2,100 new planes for India over 20 years. What gives you this reason to be optimistic?

A: The forecast is 2,100 airplanes, I wish it was 21,000 but it is 2,100 airplanes worth USD 290 billion. India is now the highest growth market in the world and not one of the highest, and we are seeing double digit growth here consistently for the entire year last year. We came very close to 100 million passengers in 2016 and I am confident that we are going to get close to 120 million passengers flying this year.

So, one is the actual evidence of what is happening, second it is based on the order book and the numbers of aircraft that are destined to come here, and our belief in the future growth of India with all the policies that are being enacted by the government of India, we see consistently increased gross domestic product (GDP) growth. We also see infrastructure build up that is happening at a reasonable pace.

All these things including disposable income, an oil price that is in a narrow band, the exchange rate which is becoming favourable to India or for the rupee, all of these things are really helping us to come up with this bullish forecast. We are again pleased to see this market continues to get better and better, it is certainly in the top five now and 2,100 airplanes in the next 20 years’ worth USD 290 billion -- quite excited to announce that today.

Q: I was just looking at your global demand numbers, you are projecting 41,030, that is the worldwide demand over the next 20 years and India accounts for about 5.1 percent of the total global demand. It is always this India-China comparison that is made and China of course has been well ahead of India when it comes to commercial aviation, but do you see that gap narrowing significantly now?

A: It has already narrowed significantly, but you have to understand the land mass of China and the time zone difference within China is significantly bigger. So, China generates a lot of revenue passenger kilometers whereas India, when you fly about two and a half hours north-south, or about same two and a half hours east-west, we are pretty much done with the domestic market.

Whereas in China, you have large land mass, population is slightly more than India, of course we are getting close to that also, but I think the gap will never be closed but it is going to get closer like you mentioned simply because we will have more and more people travel, we will generate more air scarce, but because our distances are small, and our top markets like the metropolitan cities, all of them are about two hours and this is why we cannot do the same number of what is called revenue passenger kilometers that China can do.

However, I think we are really putting on a great show in the world. India’s GDP of course is helping that, but more importantly the fact that new airplanes are coming into the country, airlines are placing orders, the profitability is in place and I am sure we will talk more about that, those are things that are helping us to grow faster. If we had spoken a decade ago, our market in India would not have been even 2 percent of the world, and now you just said correctly, it is over 5 percent which is also very important to note here.

Q: On the side-lines of the Paris Air Show Boeing signed an agreement with SpiceJet for an additional 20 aircrafts for the 737 Max. In fact this was something that was spoken off by both Prime Minister Modi and President Trump in their joint statement as well. So, give me a sense of when we can start to see the deliveries being made to SpiceJet and how deep and significant is this relationship with SpiceJet for Boeing going forward?

A: Every relationship in any place in the world is important with airlines. Every customer is important. However SpiceJet, now they have recovered significantly and have taken a firm decision to grow fast and catch up with the market share. So they had already announced, in January, 100 airplanes and now with these airplanes they are adding 20 more and they have previous order also, all of them is going to get them very close to their goal and these 20 airplanes that were announced in Paris were part of the launch group which allowed us to go ahead and put another airplane in the market called 737-10 which will take head on our competition A321 and this airplane will have 5 percent better operating trip cost or operating cost per seat and that is why we launched the programme.

I am glad to see SpiceJet has taken sort of liking for that airplane. This airplane is going to be great for metro cities where as you know the slots are constrained, you just cannot get any new slots in to Mumbai and Delhi. It is going to be similar situation in the future. So, having now those extra seats compared to 737-8 Max, the 737-10 Max will have anywhere between 25-35 extra seats. So, you can carry the same crew, the same cockpit crew, same sort of cabin crew but you can carry 25 more passengers on every flight which will help you increase your market share, revenue and of course the profitability. So, we are quite pleased to see that SpiceJet is showcasing India in the world.

They are important and so is Jet Airways. Of course Air India has been our big and great customer for a long time and they are flagship for all our wide- bodies in India. In fact we just delivered 10 days ago a 787-8 Dreamliner to them. We will deliver two more in August. So, we feel pretty good about what is happening in terms of orders and deliveries in India. More importantly they are utilising it properly, for example the wide-bodies are being used more than 12 hours a day which is what leads to profitability.

Q: Let me ask you about what you make about the proposed privatisation of Air India? Do you see this as an opportunity for Boeing going forward?

A: We obviously see opportunity for Boeing in Air India simply because they have been our customers for a long time. Air India and the Jet age in India started on the wings of Boeing. Today they fly 787s, they have 747s from the old order. They also fly 777 300 ERs non-stop to US. With a base eventually of over 45 wide-bodies, I think clearly, they will continue to grow with the type that we have and that is why we see an opportunity. We see privatisation as a way to bolster Air India even stronger, make it more viable.

We have seen similar things in the past at British Airways which has now become a very vibrant airline. We hope that with the right kind of privatisation and the right ownership with the new buyer, Air India can thrive. I personally think it is a gold mine. We have a country of over 1.1 billion people, we have need for air travel and Air India has already properties around the world, routes, slots, gates, all of those are very important assets. As you know the Air India Express which is a low cost carrier they started for regional, that has been doing extremely well.

I think that is profitable. So, these are some good pieces or the jewels of Maharaja. Air India Express is good. The MRO that we built for Air India Engineering Company is going to be good. The international routes is going to be good and they will have to improve some in the domestic market. That is why we think Air India privatisation is going to be positive for lot of stake holders including the government of India.

Q: Another interesting aspect to this is who finally gets Air India, the only party that has come to the table publically and said that they have expressed an interest in picking up Air India’s international operations as well as Air India Express is Interglobe Aviation (IndiGo), and IndiGo is not a client of yours, so would that concern you? 

A: I am not going to comment here on who is the right buyer. It is for the government of India to decide. However we have such a huge installed base in Air India that to undo that, it is going to be a big challenge. Another thing I would say is that while that is the only suitor that has publically talked about, there has been discussions in the press I am reading and I will be meeting some government of India officials later today.

We will watch very carefully, of course this is not a process that is going to happen in two months or three months, it is going to take number of months. We will watch it very carefully and that is why when we spoke earlier I used the word, right buyer. The right buyer must have incentive to make this airline a great airline.

Obviously nobody is going to put millions of dollars in the kitty unless they want to make lot of money with Air India. So, we think having a fleet type that is common, with engineers that are trained, the pilots that are trained, these are massive expensive things to do. That is why we think we will continue to do well no matter who buy's Air India going forward.

For full interview, watch accompanying videos...