Boeing: Go First Crisis Will Not Impact Indian Aviation’s Growth Trajectory

Boeing, the leading aircraft manufacturer in the United States, emphasized that the ongoing crisis at Go First will not alter the growth trajectory and macro trends of the Indian civil aviation market. Additionally, Boeing expressed that legislative clarity regarding aircraft leasing aspects will offer greater reassurance to aircraft lessors. India currently holds the position as the third largest aviation market globally and is recognized for its rapid growth. It is projected that Indian carriers will require over 2,200 aircraft in the upcoming two decades.

In light of the financial challenges faced by Go First, which led to the initiation of insolvency proceedings, Salil Gupte, President of Boeing India, acknowledged the negative implications this situation brings. The impact extends beyond the airline itself, affecting management, employees, stakeholders, and the overall transportation infrastructure.

When asked about the potential influence of the Go First crisis on the optimistic outlook for India’s aviation market, Gupte expressed his belief that such an impact is unlikely. He maintained his confidence in the continued growth of the market.

Generally, we believe that the market’s trajectory remains consistent in terms of growth and macro trends. However, it’s important to note that progress is not always linear and fluctuations are inevitable.

During an interview with PTI, he expressed confidence that India’s growth will persist despite the challenges currently faced by Go First.

Meanwhile, aircraft lessors have expressed apprehensions regarding the insolvency proceedings initiated against Go First. The resulting moratorium prevents them from repossessing the planes they have leased to the airline, exacerbating the concerns.

Domestic Airlines

In India, domestic airlines typically operate on the sale and leaseback model for their aircraft.

Regarding the concerns of the lessors, Gupte emphasized the need for legislative clarity regarding leased aircraft within the framework of the Cape Town Convention. Such clarity would offer greater reassurance to the lessors.

“The primary concern for lessors revolves around the liquidity of their assets, as they carefully assess the associated risks. Given that airplanes are highly valuable assets, ensuring their accessibility is of utmost importance.

“It is noteworthy that India has ratified the Cape Town Convention, which governs the global trading of assets. Additionally, there is pending legislation in India that aims to provide clarity on the handling of these assets in the future,” he remarked.

He emphasized that enacting this legislation would be a definitive step for India to offer greater reassurance to lessors and address the challenges they currently face in such situations.

“By accomplishing this, India would effectively address several issues raised by lessors in recent days,” Gupte stated, referring specifically to the Go First crisis.

NCLT

Furthermore, certain lessors have contested the decision of the National Company Law Tribunal (NCLT) to accept Go First’s voluntary insolvency resolution petition.

During a speech at the newly established Gurugram office of Boeing Commercial Airplanes, Gupte highlighted the remarkable growth of the Indian economy, which in turn fuels the expansion of the aviation industry.

Gupte emphasized the transformative changes occurring in India, particularly the emergence of a burgeoning middle class. He pointed out that over 90 percent of the population has yet to experience air travel and expressed anticipation for the first-time flyers to contribute to sustained demand.

Identifying a key obstacle to the growth of the Indian aviation sector, he cited the need for skilled personnel. Projections indicate that India will require an additional 31,000 pilots and 26,000 mechanics over the next two decades.

The Indian market is highly competitive, with the price elasticity of demand for aviation being extremely sensitive. Given that a significant portion of Indians still rely on train travel, Gupte emphasized the importance of maintaining competitive pricing to entice more people to choose air travel.

Regarding the prospect of establishing final assembly lines in India, Gupte stated that Boeing continually evaluates opportunities not only in the region but also in other areas.

He clarified that the final assembly line for defense aircraft differs from that of civilian planes.

Boeing has a substantial presence in India, spanning both the defense and civilian sectors. The company’s annual sourcing from the country exceeds USD 1 billion.

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