5 mins read . 19 May 2023
The Indian aviation ecosystem is facing the heat of rising demand on one side and supply chain constraints imposed by aircraft companies. Aircraft engine manufacturers have not been able to meet engine issue deadlines due to their own supply chain constraints. This has put Indian airline companies like Indigo in problems while it has pushed Go First towards insolvency.
Pratt & Whitney, one of the world’s leading aircraft engine makers, is part of the Raytheon Defence group. In fact, Go First had to halt all flight operations from May 03rd since the delay in PW’s engine supply led to half of its 54-aircraft fleet being grounded. Even Indigo Airlines had to ground 36 of its 140 PW-powered planes, and this crunching of flight volumes has left a void which has crunched flight supply and pushed up airline prices.
Union Aviation Minister, Jyotiraditya Scindia, is not very happy. The Union Ministry has taken a sympathetic approach towards Go First, given the loss-making nature of the airline industry, and especially the problems specifically caused by Pratt & Whitney engines. On its part, the government of India is actively pursuing other airlines to service the supply gap; but it is too much to fill at short notice.
The DGCA and Ministry have urged Go First to submit their plans for flight resumption, including their proposed number of planes and routes. However, the government also decided not to interfere with contractual issues between Go First and Pratt & Whitney. However, to speed up things and protect the domestic airline industry, the government has sent out a strong word to Pratt & Whitney explaining the need to have planes up and running immediately.
However, problems with P&W engines are not unique to India, but the problem is universal. In fact, the supply chain and labour crises were estimated by Greg Hayes, CEO of Raytheon (parent company of PW) in October 2022. However, the commercial engine deliveries in October 2022 at 192 were still better than July 2022 at 177 engines. So, what are the issues here?
Major headwinds that are pulling down the supply volumes include labour availability, rampant high inflation, and soaring energy prices. They have had to spend an additional $500 million on supply chain and energy price compensation plus $200 million from cessation in Russia. These headwinds had a prolonged impact in the midst of rising recessionary fears. However, Pratt & Whitney expects supply chains to get back to pre-pandemic levels by this year with Boeing and Airbus accelerating production rates.
As mentioned earlier, the airline industry is one which is extremely fragile and enigmatic and is a largely loss-making business too. There is a vast array of factors which could easily lead to the downfall of airline business, including inability to attract investors like Jet Airways, or incurring huge costs which lead to inability to reimburse vendors like Kingfisher.
India has taken its initial steps in the right direction to shadow some of the risk which looms for aircraft lessors and financiers by signing the Cape Town Convention (CTC) and Protocol in 2008. The key issue is that while the treaty was signed, there has been no Bill passed yet to implement it in full. However, Scindia has promised that the Bill is in works, and will be soon presented to the Cabinet and the Parliament. Eventually, commitments have to work both ways!
Content Source: Business Standard