ICRA: Despite engine woes, Indian aviation cleared for takeoff

16 Apr 2024 CW Team

The recent report by ICRA, a leading credit rating agency, suggests that despite encountering supply chain challenges and engine failures, the Indian aviation industry is poised for significant growth in the upcoming years.

According to the report, in the fiscal year 2024, Go Airlines (India) Limited grounded half of its fleet due to faulty P&W engines, resulting in the halting of its operations. Similarly, InterGlobe Aviation (IndiGo) had also grounded more than 70 aircraft by February 2, 2024, due to Pratt & Whitney (P&W) engine issues, including problems arising from powder metal contamination within its P&W fleet.

It was estimated that by March 31, approximately 24-26 percent of the total fleet of Indian airlines in operations had been grounded. The report highlighted that due to the global recall of engines by P&W and other ongoing issues with Original Equipment Manufacturer (OEM) engines, the testing period by P&W is expected to be prolonged, lasting around 250-300 days.

Consequently, this situation is likely to lead to increased operating expenses incurred from grounding costs, higher lease rentals due to the necessity of acquiring additional aircraft to compensate for grounded capacity, escalating lease rates, and diminished fuel efficiency resulting from the use of older aircraft obtained on spot lease. Such factors are anticipated to negatively impact the cost structure of airlines.

Nevertheless, the report pointed out that despite these challenges, healthy yields, high passenger load factors (PLF), and partial compensation available from OEM's engines would help mitigate the impact to some extent. Additionally, the report noted that capacity deployment for March 2024 exceeded that of March 2023 by 1.8 percent, with 93,785 departures in March 2024 compared to 92,098 departures in March 2023.

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