The focus of the aviation industry right now is, understandably, on getting flights back to pre-Covid levels and reducing the losses that the industry has suffered during the last six months due to the pandemic. However, carriers in India are also taking an equally serious look at their aircraft orders.
According to estimates, Indian carriers have placed orders for nearly 1,000 aircraft to be delivered over the next five years. But with the industry suffering huge losses and the International Air Transport Association (IATA) estimating that normalcy in flying will not return till at least 2024, what happens to these plans?
Some airlines are looking at deferred lease payments while others like Vistara are taking delivery of the aircraft they had ordered before Covid-19 struck. For instance, the airline took delivery of an Airbus A-321 New Engine Option in July and started flying this aircraft on the Delhi-Chennai-Delhi route from August 20.
Decisions big and small
With a complete lockdown first and then the partial opening up of commercial activity across the world, there is little doubt that the manufacture and delivery of aircraft has slowed down over the last six months.
What this means is that there is going to be a further delay in an already long process of aircraft delivery. Airlines have to do minute planning and spend years before an aircraft can start flying in their colours.
The process of ordering a new aircraft goes through various stages. First, an airline has to select the manufacturer it wants to opt for. The next crucial component in an aircraft is the engine about which a decision has to be taken.
However, there is more to an aircraft than the outer body and the engine. Vinod Kannan, Chief Commercial Officer, Vistara, explains that soon after deciding on an aircraft, the airline also has to decide on things like seats and Wi-Fi that will go into the plane.
“Within one or two months of deciding which aircraft an airline will have, the seats are chosen. I think we decided on the aircraft in July and by August or September we had informed Boeing that we are going to choose these seats,” Kannan adds.
Others point out that an airline also has to consider multiple parameters when deciding on an aircraft, like LOPA or Lay out of Passenger Aircraft, which will determine the number of seats the aircraft will eventually have.
Piyush Bansal and Shipra Jaipuria, Manager, India Operations Lead, ICF, add that all Buyer Finished Equipment or BFE is ideally finalised eight to 10 months before the scheduled delivery of the first aircraft.
However, important though these aspects are, there is another significant decision that airlines have to take: how they are going to pay for the aircraft.
There are generally two methods by which an airline can get an aircraft — sale and lease back (SLB) of the aircraft or buying it outright. If an airline decides to follow the SLB approach, then the leasing company is also involved in the delivery.
The story is, of course, different if an airline wants to buy the aircraft as then it has to be more involved in the delivery process as there are a number of checks for different components on an aircraft, including the airframe, aircraft in-flight connectivity and seats, which are handled by the airline’s teams.
Cabin walk-through
Finally, there is a cabin walk-through a month or so before delivery, which is the final acceptance before transfer of title or before the aircraft comes to the airline during which teams from the airline check the aircraft to make sure that it is in the condition that the airline wants it to be.
For instance, when Vistara got its first Boeing 787 aircraft in February, five to six days before the aircraft was to be delivered to the airline, Captain Bosco Xavier, Chief Pilot and Vice-President, Flight Operations, and his team reached Seattle to take a final look.
He recalls that as part of the acceptance flight, he had to do a customer walk starting with the cockpit system. “We check everything — hydraulics, electric, stand-by power, air-conditioning on the ground. If everything is okay we do what is called a customer acceptance flight where we fly with the Boeing test pilot. Once again, there is a schedule of tests that we do. We check the normal check lists, the normal procedures, stand-by power, which takes about three to four hours as well. We have to be happy with the profile, which means that all the tests were as they were, all the stand-by equipment and all the mock emergency procedures were to the specification of the aircraft,” Captain Bosco explains.
However, in the changed environment today, all airlines are looking to adjust their aircraft deliveries to meet the new truncated demand in the market. Airlines like IndiGo are looking at various arrangements for balancing their fleet.
According to Ronojoy Dutta, Whole Time Director and Chief Executive Officer, IndiGo, the airline sees the entire delivery process as a long-term one of, say, Airbus manufacturing airplanes, the airline buying them, and the lessors doing a sale-leaseback in-between. If one of these components is upset, then the other two also don’t gain, they lose.
“So, we are in a very close relationship with our lessors and with Airbus, saying how does this whole pipeline work effectively? Are there negotiations? Of course, there are negotiations. But these are not transaction-based negotiations, they are relationship-based negotiations,” he said in June this year.