Indian Airlines Turn to Fuel-Efficient Planes Amid Higher Jet Fuel Prices

Strategic Insights -

In a bid to counter rising costs, Indian airlines are rapidly shifting towards fuel-efficient aircraft such as the Airbus A320neo and Boeing 737 MAX. With jet fuel prices in India being 60% higher than in Singapore, local airlines are seeing significant cost savings by opting for newer planes that promise fuel savings of 14-20%. The fuel prices account for more than 45-55% of an airline's revenue in India, and a 4% reduction in fuel costs adds around 2% to the operating margins of airlines, according to India Ratings and Research.

Key Takeaways:

  • State-run Air India Ltd, GoAir, IndiGo, SpiceJet, and Jet Airways are buying or leasing Airbus A320neos and Boeing 737 MAX planes for fuel efficiency.
  • These planes promise fuel savings of 14-20%, which is crucial given that fuel prices in India are 60% higher than in Singapore.
  • Jet fuel prices account for more than 45-55% of an airline's revenue in India, making fuel efficiency critical.
  • A 4% reduction in fuel costs adds around 2% to the operating margins of airlines, according to India Ratings and Research.
  • IndiGo will have 43 A320neos by March 2018, out of an expected fleet strength of 137 planes, and will continue to expand its A320neo fleet.
  • Rival airline SpiceJet has ordered 42 Boeing B737 Max planes, which promise 14% cost savings, and will fund the acquisition by selling and leasing back the planes.
  • Both Jet Airways and Boeing remain silent on the reported order of 50 new fuel-efficient Boeing 737 MAX planes.

Statistics:

  • Jet fuel prices in India are 60% higher than in Singapore.
  • Fuel prices account for 45-55% of airline revenue in India.
  • A 4% reduction in fuel costs adds around 2% to the operating margins of airlines.
  • A320neo planes promise fuel savings of 14-20%.
  • Boeing B737 Max planes promise 14% cost savings.
  • India Ratings and Research estimates a 2% increase in operating margins with a 4% reduction in fuel costs.
  • IndiGo will have a fleet of 137 planes by March 2018, including 43 A320neos.
  • SpiceJet has ordered 42 Boeing B737 Max planes worth $4.4 billion.
  • Delivery of SpiceJet's 42 Boeing B737 Max planes will start in 2018.

Sources:

  • Aviation Weekly: "...Airbus A320neo and Boeing 737 MAX offer fuel savings of 14-20%..."
  • India Ratings and Research: "A 4% reduction in fuel costs adds around 2% to the operating margins of airlines."
  • MINT: "Air India has agreed to lease 14 all-economy A320neos from Kuwait's Aviation Lease and Finance Co."
  • MINT: "SpiceJet has ordered 42 Boeing B737 Max planes worth $4.4 billion by swapping existing orders of 12 Boeing 737 planes."
  • MINT: "Delivery will start from 2018 and the airline will fund the acquisition by selling and leasing back the planes."