Supply chain woes to keep airfares elevated; Long Road to normalcy as spares, engines remain in short supply | The Financial Express

Supply chain woes to keep airfares elevated; Long Road to normalcy as spares, engines remain in short supply

Airbus has said that the supply chain remains “fragile” and that its order backlog stood at 7,294 at the end of September quarter while for Boeing, the backlog stood at over 4,300.

Supply chain woes to keep airfares elevated; Long Road to normalcy as spares, engines remain in short supply
“With the induction of many serviceable engines, GoFirst expects to increase the frequency and number of flights to provide improved connectivity to its passengers and to regain its market share,” it had added.

Airfares are expected to soar till the middle of next year as carriers will not be able to deploy their full capacity due to supply chain woes. Sector experts maintain that though the shortage of spare engines & parts has begun to ease in some cases, the return to normalcy would only be by the summer of 2023.

The supply chain woes are also leading to delay in deliveries of new aircraft and both Airbus and Boeing are sitting on an order backlog. Airbus has said that the supply chain remains “fragile” and that its order backlog stood at 7,294 at the end of September quarter while for Boeing, the backlog stood at over 4,300.

Aloke Bajpai, Group CEO and co-founder of ixigo, said that average airfares have increased by 25-30% this year. “Capacity deployment is a key issue impacting the industry right now. Airlines are facing supply chain issues due to a shortage of spare engines and parts. Smaller airlines have not added capacity as fast as they were doing pre-Covid. Because of this, there are choke points on certain routes. Recently, we saw during the Diwali rush that the Mumbai-Delhi route was sold out. This kind of demand is expected around the festive period and if there was more capacity addition we would have sustained fares that were lower and fulfiled greater demand,” he said.

Echoing Bajpai’s views, Mark Martin, CEO of Martin Consulting, said that supply chain issues do drive up fares because grounded aircraft still require lease rentals to be paid and these payments eat into airline finances.

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The country’s largest airline by passengers, IndiGo, has 30 of its Airbus320 aircraft grounded at present for want of engines. Metal cracks inside some aircraft engines is one of the problems being faced by domestic flyers in recent months. These cracks have been happening on the engines used in one type of narrow body aircraft and Indian airlines have been compelled to ground many aircraft with such cracks, as the engine supplier is unable to meet the surge in demand for repairs.

An IndiGo spokesperson confirmed the number of aircraft on ground but did not comment further. GoFirst also declined to comment, but industry sources said at least 15 of its aircraft are also grounded. Earlier this week, GoFirst said that it has “received confirmation from Pratt and Whitney for delivery of serviceable engines soon and the same will be immediately put into service within December and will certainly help to cater the growing demand for domestic travel”.

“With the induction of many serviceable engines, GoFirst expects to increase the frequency and number of flights to provide improved connectivity to its passengers and to regain its market share,” it had added.

Sources said that Air India has seven aircraft on ground due to maintenance issues. A senior official at one of the large domestic carriers, pointed out that the supplier lacks adequate capacity to meet the global requirement of engines and not just Indian airlines but airlines using one particular engine type across the the globe have aircraft sitting on ground due to the same issue.

While GoFirst has indicated that supply constraints may already be easing, industry sources said that the supplies may normalise only by next fiscal. They also said that airlines have not added new capacity as per plans drawn up earlier due to ongoing engine issues but frequencies on busy domestic routes have not been slashed.

Another senior official at a second airline said that the usual practice in the industry has been robbing some grounded aircraft of parts to make other aircraft functional again. “But this time the supply constraint is bigger in scale which is why planned industry capacity addition has suffered,” he said.

Besides, the inability of the engine supplier to cater to sudden and enhanced demand and irregular payments by some airlines to other parts’ vendors has also led to increased aircraft grounding. Industry sources said that aircraft spares are expensive and not all airlines have adequate cash flow right now to pay for mandatory maintenance or get defective aircraft parts replaced.

To tide over the current situation, IndiGo has already announced wet leasing of two Boeing 777 aircraft to cater to rising international demand. Wet lease refers to an arrangement where the lessor provides crew, maintenance and insurance along with the aircraft. Aviation regulator Directorate General of Civil Aviation has recently amended rules to allow wet lease operations for one year for Indian airlines, instead of six months earlier, to mitigate supply issues for airlines.

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First published on: 03-12-2022 at 06:30 IST