Boeing ups India aircraft order forecast by 10 percent

MUMBAI (Reuters) - Boeing Co (BA.N) sees an uptick in demand for aircraft in India, despite a current downturn in the domestic aviation market on account of high fuel prices and overcapacity, a senior company official said on Wednesday.

Boeing, which has sold civilian aircraft worth $25 billion to India in the past three years, expects rapid economic growth, rising incomes and greater liberalization will help boost demand to 1,001 aircraft worth $105 billion until 2027.

That is nearly 10 percent higher from its 2007 forecast.

"Despite the temporary downturn, over the long-term we are very bullish, as the market fundamentals remain strong," Dinesh Keskar, senior vice president for sales, commercial airplanes, said at a news conference.

"We're not seeing deferrals or cancellations. Which is why, contrary to expectations, we've upped our forecast."

It is expected that losses in the domestic aviation industry could more than double to up to $1.5 billion in 2008/09 as high prices of jet fuel, which makes up about 40 percent of an airline's running cost, have forced up fares and dented demand.

"It is a do-or-die environment," Keskar said.

"The next few months will be tricky, but a focus on reducing losses has already started, and we think the domestic market will find equilibrium over the next 12 months," Keskar said.

Consolidation, ongoing capacity reduction and a recent infusion of capital in discount carrier SpiceJet (SPJT.BO), a Boeing customer, are signs the market is improving, he said.

Air travel in India is forecast to grow at an average rate of 8 percent annually over the next 20 years, the fastest pace in the world, and more than twice the global average, he said.

With the addition of new aircraft, India's airplane fleet will almost quadruple to 1,204 over the next 20 years, he said, helped also by improving airport infrastructure and further liberalization.

Boeing, which has 103 planes on order from India for delivery till 2014, is also looking to bid for defense projects worth up to $20 billion over the next 10 years in India.

It will also explore opportunities for new alliances and extending existing ventures with Indian firms such as state-run Hindustan Aeronautics Ltd, Wipro Ltd (WIPR.BO), HCL Technologies (HCLT.BO) and Tata Motors' (TAMO.BO) TAL Manufacturing Solutions.

India will receive its first 787 Dreamliner, which has been plagued by delays, in end-2009, when state-run Air India AI.UL is slated to receive the first of its 27 Dreamliners on order.

Several carriers have demanded redress for the delays.

"There is a clause in the contract, and there is no dispute on that front with Air India," Keskar said.