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Low-Fare Carrier in India Adding Airbus Jets BUSINESS ASIA By Bloomberg

Posted on: Monday, 26 December 2005, 12:00 CST

By Sam Nagarajan

Deccan Aviation, which owns India's first low-fare carrier, Air Deccan, said it had signed an agreement with Airbus to buy an additional 30 A320 planes at a list price of $1.5 billion to meet expansion needs

"We thought now is the right time to go for additional planes," the airline's managing director, G.R. Gopinath, said on Saturday in a telephone interview from Bangalore, where Deccan is based. "We need to have these planes on hand as we expand our network, and the deal helped us negotiate a better price on existing orders as well."

India's airlines, three of which started flying in the past 24 months, are increasingly tapping global equity markets to raise funds for buying new planes and expanding their routes as air travel in the country grows. The country's airlines may need $35 billion of new aircraft in the next 20 years, according to Boeing's projections, while Airbus estimates the demand at 570 planes by 2023.

The company, which started in 1995 as a helicopter charter service, expects to carry four million passengers in the 12 months through March 2006, compared with 1.1 million passengers a year earlier, Gopinath said in June. Sales may almost triple, to 10 billion rupees, or $221 million, from 3.5 billion rupees, he said.

Deccan operates a total of 24 aircraft at present, including seven Airbus planes and 17 planes made by Avions de Transport Regional. It has 32 Airbus A320 and 30 ATR72 planes already on order. After taking delivery of the aircraft, the size of the fleet may expand to as many as 115 by March 2013, a company statement said. The carrier plans to raise as much as $300 million in a share sale that may take place next June, according to Gopinath.

"This is strategic planning by Deccan as they continuously evaluate their business model," said Kapil Kaul, chief executive officer of the Indian unit of the Center for Asia Pacific Aviation, a research agency. "The world over, low-cost carriers are seeing good growth, and India is no exception."

India's air passenger traffic will rise 25 percent a year until 2010, the government said on Nov. 18, faster than previously estimated, as new airlines emerge and rising incomes encourage air travel in India, the world's second most populous nation, where 15 million people travel by train every day.

"Deccan will benefit from this opportunity that exists, as they are planning for the next 10 years or so," Kaul said.

As many as 59.5 million people flew in India and to overseas destinations in the year that ended on March 31, a rise of 22 percent from a year earlier, according to figures provided by the government. Of this, local traffic rose 25 percent to 40.1 million, it said.

India's economy is headed for a growth of about 7.5 percent in the fiscal year ending on March 31, according to the central bank, the second-fastest pace since the year that ended in March 1997. Growth was 6.9 percent last year.

Source: International Herald Tribune

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