If 2022 was action-packed, 2023 maybe even more so. The year was largely dominated by Air India, its decisions, and its rumoured mega-order for new aircraft. But a lot more is at stake in 2023. For one, it will be a year to see if the industry can be profitable, starting with IndiGo, the largest carrier.
The world over, airlines have turned profitable, repaid their loans, and are looking at adding capacity. In India, the industry is still bleeding, yet looking at augmenting capacity — a combustible combination.
Mega order from Air India
From the Farnborough air show in July to the last days of 2022, the bush has been buzzing about this mega order from Air India (AI). The closely-guarded decision has seen the media speculate about the number of planes being ordered. In the end, the year went by without any order. However, the order is imminent, it’s just a matter of when the last of the nitty-gritty are closed before the deal can be announced.
Air India’s integration efforts
It will be a very important year for Air India. The supply of planes — especially the narrow-body fleet — have been tied up. These will be inducted in 2023. Work will also be afoot to merge AirAsia India with Air India Express, probably by the end of October so that the winter schedule starts with just one low-cost brand. There will also be a larger integration of services between Vistara and Air India until the merger is complete in early 2024.
The challenge for Air India will be to fix its existing planes. The airline has stated that it is working on addressing issues with its seats and operationalising the IFE (in-flight entertainment) on its wide-body aircraft in the next few months. Complaints about AI’s non-functional IFE and seats are a regular affair. Those who did not expect much from a government-backed AI demand the works from a Tata-backed Air India. Passengers will run out of patience if these are not addressed soon.
Currently, the airline is enjoying the benefits of overflying Russian airspace, which only a handful of carriers can. That has helped keep competition at bay to an extent. Will that change in 2023? Will the Russia-Ukraine conflict end and open up the skies? There could be sudden competition for Air India if that happens, but if it doesn’t then Air India is in for a spot of good weather.
Supply chain issues and its impact on fleet
Just about everybody is impacted by supply chain issues. This has led to major groundings for both IndiGo and Go FIRST, with Indigo having to renew leases. Akasa Air is using aircraft with a two-class configuration as a mono-class.
From seats to engines, all supply chains are stretched, and while there is hope that things would settle in 2023, a lot depends on the current Covid situation.
Make or break for Jet Airways
The airline has been in the news for all the wrong reasons in 2022. Its plan to start in mid-May was revised to September. Yet, even as the year ends, the Jalan-Kalrock consortium (Jet Airways’ new owners) continues to be locked in a battle with the banks. That has led to some staff having to take pay cuts and being sent on leave.
An Indian airline has never restarted operations after shutting down. Jet Airways is trying this against all odds but if nothing moves in 2023, most likely it never will.
Airport privatisation
Airport privatisation was on the backburner in 2022. There were rumours of the Adani group buying a stake in Fairfax-promoted BIAL, which was refuted by Fairfax. Six of the country’s airports are with the Adani group. GMR is operationalising Mopa (Goa), and the Supreme Court (SC) has upheld its right to run Nagpur Airport.
Will the sector attract more players? Will Zurich, which is leading the consortium to build the NOIDA airport, participate in the next round of privatisation?
Non-aero revenue and international flights are a money spinner for airports. The government has time and again made it clear that it does not want to add points of call for foreign airlines. This could have a negative impact on the valuation of Tier II airports up for privatisation. A point of call is an airport where a foreign airline can arrive or depart from.
Twenty planes of Akasa Air
Akasa Air plans to expand its fleet to 20 planes, the fastest pace of expansion in Indian skies. This will allow the airline to start international flights and earn in foreign currency, which will partially offset the impact of the depreciating rupee. But it has so far not been able to induct aircraft at the rate of two per month, which it had set out to do. The airline has said that it remains on track to induct 18 by March, a steep target with six inductions in three months.
When will it reach twenty and start the fight to corner bilateral rights?
Wide-body ambitions of IndiGo
After a lot of back and forth, the ministry has changed the rules for wet leases. IndiGo was the first beneficiary and it started flights to Istanbul with its first wet-leased wide-body aircraft, with more expected to follow. Will this be a stop-gap arrangement till the time the narrow-body XLRs come, or will it place an order for wide-body aircraft? Its balance sheet will be stretched, but nobody knows how sweet the Turkish Airlines deal is, since Turkish Airlines would benefit the most by being able to double its seat count in a constrained bilateral arrangement.
Cash infusion into SpiceJet and Go FIRST
SpiceJet had announced a slump sale of its cargo arm SpiceXpress in August 2021. But the airline has not yet hived it off as a separate entity. After years of not always walking the talk, the airline continues to survive and use wet leases for fleet expansion in the peak season. Go FIRST has delayed its IPO and continues to rely on funding from the owners, the Wadia group, to continue operations.
Both could be washed away in the deluge that IndiGo and Air India would cause, so what is the game plan to stay afloat? A strategic sale or fundraise? Apart from money, the two airlines need a strategy.
A new class of service
As IndiGo inducts its wet-leased wide-body aircraft, it will have to handle a two-class mix for the first time. Since 2006, when the airline started, there was no option of selecting a class of service on IndiGo. That will change. How both the airline and passengers respond to this will be known this year. IndiGo is not the only airline that’s going to have a new class of service. Air India, too, will start selling premium economy seats. It needs to be seen if that will be part of the narrow-body aircraft being inducted in 2023.
Operational airports and capacity augmentation
The first week of the year will see Mopa going live. This will be followed by many more, including the full-scale use of Terminal 2 at Bengaluru, which was inaugurated last November. Uttar Pradesh was to have the maximum number of operational airports among all states, which hasn’t happened yet but it could change this year. Completion of work at Hyderabad and Delhi will also strengthen capacity.
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