Airfares to surge amidst aircraft shortage

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Airfares to surge amidst aircraft shortage

Wednesday, 10 July 2024 | Shivaji Sarkar

Airfares to surge amidst aircraft shortage

Indian air travelers are bracing for a steep hike in ticket prices as India is feeling the repercussions of a significant disruption in Boeing's production schedule

Airfares to shoot up sharply as airlines in India, the third largest in the world, face a shortage of aircraft.The airlines are to suffer as the US Boeing is in crisis for its Starliner space vehicle leakage and two fatal crashes defrauding the US government. Boeing has lost more than $32 billion since 2019.  Fewer companies could lose that kind of money and not be facing bankruptcy. Boeing may face three years of probation, independent safety audits and a penalty of $ 487.3 million in penalty.It has put its new aircraft manufacturing off schedule causing delivery of far fewer planes to airlines in India. It would hamper the growth of the industry here and limit the capability to offer seats to fliers. It would result in severe seat shortages and spiralling fares.

The US Justice Department might charge Boeing with fraud if it does not plead guilty to two deadly Max crashes in 2018 and 2019 killing 346 people. The case stems from the department’s determination that Boeing violated an agreement that was intended to resolve a 2021 charge of conspiracy to defraud the US government. Boeing is charged with misleading regulators who approved the 737 Max and set pilot-training requirements to fly the plane. The company blamed two relatively low-level employees for the fraud. Boeing reached a $2.5 billion settlement for the 2018 and 2019 Ethiopian crashes with the Justice Department in January 2021 to avoid prosecution on a single charge of fraud — misleading federal regulators who approved the plane.

Boeing blamed the deception on two relatively low-level employees.In March 2019, an Ethiopian Airlines 737 MAX crashed, killing all 157 on board, after which regulators around the world grounded MAX aircraft. The crashes were blamed on a flaw with a newly-inducted system for pushing the aircraft nose down to prevent the plane from stalling.

This week the justice department’s criminal fraud section told a federal court Boeing violated terms of the settlement by failing to make promised changes to detect and prevent violations of federal anti-fraud laws. The determination means that Boeing could be prosecuted “for any federal criminal violation,” including the charge of fraud that the company hoped to avoid with the settlement, the Justice Department said.

The company handed over 27 planes in January, its lowest tally since September, compared with 67 deliveries in December. It sold three Boeing 737 Max planes but also logged three cancellations. As it was grappling with the situation on January 5, 2024, a door plug blew out on an Alaska Airlines flight at 16,000 feet shortly after take-off from Portland, Oregon. None was injured but it ripped off headrests and exposed passengers to a gaping hole in the 26th row. Bolts holding a door panel were also found missing, the US National Transportation Safety Board reported.

This led the Federal Aviation Administration (FAA) to halt Boeing’s planned production increases till it was satisfied with the quality control issues.

The Max planes that Air India wants to buy, Boeing says, would have to rework about 50 of the undelivered planes because of incorrectly drilled holes in 22 fuselages or the larger outer shell that encompasses the main aircraft body.

It is a new production glitch that could slow deliveries further. Various FAA safety inspections would periodically stop the production line. The FAA says that it would allow the variant of the 737 Max 9 with the door plug to fly again – after demanding checks to the bolts on every plane.The family of two MAX victims want Boeing to face a criminal trial and pay a fine of $ 24.8 billion. They are against plea bargaining saying this was just a reworking of “letting Boeing off the hook”. In such a situation, the hope of Air India Express and Akasa getting their deliveries does not look bright.

Questions arise about how the two airlines agreed to the deal of MAX, which still has not cleared safety issues. China has reportedly cancelled some of its bookings.Amid such situations in June 2022, Tata Sons signed the agreement during the Paris Air Show for 20 Boeing Dreamliners, 10 Boeing 777X widebody aircraft, and 190 Boeing 737 MAX narrow-body aircraft along with 250 Euro Airbus for $ 70 billion, according to Tata Sons and Air India chairman N Chandrashekhar.

In June 2023, IndiGo made the world’s largest aircraft order by signing a deal for 500 A320 neo family planes from Airbus. Indigo is expecting some Airbus 320 deliveries.

But that would not suffice the needs of the growing number of passengers. Indigo is set to ground many aircraft. So would Spicejet, which met with several security issues. The delays, which are said to be unavoidable, would create a shortage of aircraft almost with all major airlines, Indigo, Spicejet, Akasa and Air India.

Jet Airways and Go First have gone bankrupt adding to the shortage.The Boeing crisis could hit India hard with Air India and Akasa having fewer aircraft and an overall shortage of seats for domestic and international routes spiralling fares. Airlines in India carried a record 152 million passengers in 2023, a 30 per cent increase from 2022 and a 5 per cent rise over 2019. According to the Director General of Civil Aviation, the domestic air traffic from January to May rose 4 per cent during the period to 13.8 million.

The aviation industry fears that the reduced aircraft delivery is set to impact the aviation market severely more so as several passengers rise more owing to a fallacious dynamic Indian Railways fare structure. It hikes train fares to the level of air fares making people prefer to travel by air. This is impacting the railways and the airlines alike.

Fares in certain destinations like Kochi-Delhi Kolkata-Delhi Mumbai-Delhi or Guwahati-Delhi could skyrocket and match some of the international routes as the country does not have an integrated transportation approach.

If the rail fares are cut and the reservation system rationalised, it could take off a significant load from the airlines. The unimaginative system predicts a scramble for airline tickets by the end of December winter vacation.

(The writer is a policy analyst; views expressed are personal)

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