Airbus’ decision to halt the delivery of A320 planes is unlikely to impact Indian low-cost major IndiGo’s aggressive expansion, as it plans to induct around 40 planes in the next one year. The plan includes leasing of around 25 A320 ceo and delivery of 15 new ATRs.
While the plan has been revised from the original target of adding 60 planes, it is still higher than the previous year. However, its expense is likely to go higher as it goes for short-term lease due to high maintenance and ownership cost of older planes. IndiGo added 24 planes in FY 17 and 24 as of date in FY18.
On Friday, Airbus told customers that it was postponing all A320 neo deliveries till further notice after the latest disclosure in a series of glitches on the Pratt & Whitney manufactured geared turbofan engine that power the planes.
“Pratt & Whitney, with the support of Airbus, is in close contact with customers to address the results of a recent finding related to the knife edge seal in the high-pressure compressor aft hub on the PW1100G-JM engine powering the A320neo. This issue is isolated to a limited subpopulation of engines,” the engine maker said in a statement.
As a result of the warning, IndiGo had grounded three planes, which it said had engines of the same variant.
“The issue will not impact IndiGo’s expansion plan much, the airline still will induct almost 40 planes in next 12 months,” said a person aware of the airline’s plan. “The airline will still grow by 20 per cent which is double of its rivals,” the person said.
The airline in its post results calls last month had indicated a 24 per cent increase in capacity implying that the average growth in FY18 will be around 18 per cent. Analysts had expected growth to accelerate.
After the previous technical glitch with the engines of the A320 neo planes was solved, IndiGo had become aggressive in its induction plans.
Last quarter IndiGo added 12 aircraft including eight A320 neo and three ATR. The airline also took four planes in a wet lease arrangement with Lithanian airline Small Planet.
Experts also said that the slowdown is unlikely to have any major impact on the growth of Indian market. “The Indian market will continue to grow by around 15 per cent. The void, which A320 neo might create will be filled up with leases by IndiGo along with aggressive induction by SpiceJet,” said Ameya Joshi, founder of aviation blog Network Thoughts. SpiceJet is likely to induct around 24 planes by December (15 Boeing 737 and 9 Q400 Bombardier).
However, IndiGo’s expenses are expected to climb higher as rates in leasing market for A320 will increase after the recent disruption. “There is a large demand of single aisle narrow body jet like A320, particularly among Asian airlines. With technical disruptions impacting production rates of new generation, we expect rates to be firm for old aircraft,” said a December research report of Singapore-based DBS bank. Additionally, the maintenance cost is also higher for older planes.
IndiGo’s non-fuel cost increased by 2.2 per cent in the December quarter due to the same reason.