Indian airlines take advantage of slowdown in aircraft, engine deliveries to China

Aircrafts

Indian airlines, including Air India, Akasa Air, and IndiGo, are taking advantage of the slowdown in deliveries of aircraft engines and aircraft to Chinese airlines by taking priority deliveries as they look to expand their domestic and international networks.

"Indian airlines have moved quickly to capitalise on the ban on Boeing 737 aircraft deliveries to China and a slowdown in engine deliveries to Chinese airlines due to the slow recovery of the Chinese aviation market after COVID-19," a senior official from a leasing major told Moneycontrol.

He added that around 40 Boeing 737 aircraft that were manufactured for Chinese carriers will be delivered to Indian airlines between 2022 and 2023.

"Aircraft being delivered to Akasa Air and those that will be delivered to Air India are part of the aircraft that were manufactured for Chinese carriers," the official said.

While India's air safety regulator, the Directorate General of Civil Aviation (DGCA), cleared Boeing Co's 737 MAX aircraft to fly in August 2021, operations of the Boeing 737 Max aircraft in Chinese airspace restarted only in January 2023.

In January 2023, Boeing said that it had around 138 Max aircraft awaiting deliveries to Chinese customers. The US aircraft manufacturer had also said that it was considering offering part of its Chinese Max inventory to other customers to de-risk its backlog.

Akasa Air and Air India have placed an order for around 270 Boeing narrowbody 737 Max jets. While Akasa Air has already taken delivery of around 19 jets and expects to increase its fleet size to 25 by October 2023, Air India expects to take delivery of 25 Boeing B737-800s in the second half of 2023.

A second official from a leasing firm based out of Singapore said that Indian airlines have pushed aircraft manufacturers to ramp up deliveries in 2022 to take advantage of growing domestic air traffic and have even paid a premium to jump the line to take deliveries over their international counterparts.

"Some Indian airlines saw a rise in deliveries in 2022 compared to 2019, which isn’t the case for any other airline in a major market around the world," the second official said.

He added that deliveries to Chinese airlines were still below pre-COVID levels in 2022, as air traffic in China was still subdued due to the lockdown and China's zero-COVID policy.

He added that while China’s air traffic recovery has been slow, India has witnessed the fastest recovery in air traffic in the world, especially in the domestic market.

In 2022, Boeing delivered eight airplanes to China, while Airbus delivered more than 100.

An industry insider that closely tracks aircraft and airline fleets said that Chinese carriers, including China Southern and Air China, had, in 2022, sold some of their delivery slots for Boeing aircraft to the likes of Akasa Air and Air India.

"It is a win-win situation for both parties — Chinese carriers benefitted from extra ancillary income at a time when operations were subdued and Indian airlines received aircraft," the industry insider said.

Another industry insider said that IndiGo added five new aircraft and also took delivery of five LEAP-1A engines for its grounded fleet in May.

"IndiGo took expedited delivery of five LEAP-1A engines in May, which were earlier meant to be supplied to Air China," the second industry insider said.

Boeing 737 Max aircraft was grounded by the Civil Aviation Administration of China (CAAC), the aviation watchdog of the country, in March 2019.

The Boeing 737 Max aircraft was grounded following two accidents in Indonesia and Ethiopia, with CAAC being one of the first agencies to do so.

Although CAAC indicated in late 2021 that MAX could return to service, the actual return was delayed due to the COVID-19 crisis and lockdowns.