Airlines in India Cancelling Their Orders with Airbus and Boeing

Air India, Jet, Kingfisher Airlines and other carriers from the country have placed orders with Airbus and Boeing totaling more than $30 billion in the past three years as economic growth spurred optimism about travel demand.

Carriers are now struggling to raise funds because overcapacity, higher fuel prices and slowing demand will likely cause the industry to post $2 billion of losses this year, CAPA said. Local banks have cut lending to airlines, Civil Aviation Minister Praful Patel said yesterday.

Lenders worldwide have also curbed loans across all industries on concerns about getting their money back amid bank failures and an economic slowdown.

Boeing is confident it will keep its orders in India, even though carriers are struggling to find funds.

``It's a little bit harder for Indian aviation because of the overcapacity,'' said Boeing's Senior Vice President Dinesh Keskar. ``Who will give you money if they know that you will finish it in a certain amount of time?''

Toulouse, France-based Airbus in May said India was the weakest airliner market and predicted that carriers may delay or cancel plane orders in the next 12 months.

India's government will ask local banks not to put ``undue pressure'' on airlines, minister Patel said: ``We are finding airlines complaining that banks and institutions are not very happy to lend to them,'' Patel said. ``Airlines should be given breathing space to tide over this bad patch.''

Indian airline losses, which the International Air Transport Association says will be the biggest in the world this year after the U.S., are also spurring consolidation. Jet Airways and Kingfisher each bought a discount airline last year and this week they said they will cooperate on routes and share facilities.

The two airlines aim to save as much as 15 billion rupees ($307 million) with their alliance.

Kingfisher has also scaled backed growth plans. Airbus said in September it won an order from Arik Air of Nigeria for three A340-500 aircraft that were originally built for Kingfisher. The planemaker has also agreed to postpone deliveries of 32 single- aisle planes, the Financial Times reported Aug. 25, citing an interview with Kingfisher Chief Executive Officer Vijay Mallya.

Jet is considering delaying the delivery of two Boeing 777 aircraft by a year, Saroj K. Datta, executive director, said in July. The airline said that, it cut 800 jobs and may increase this to as many as 1,900 positions.