Five airbus A340-500s (with an option for five more), five A380s, five A330s, five A350s, 30 A320s, and 35atr 72-500s-collectively worth roughly $4-5 billion (Rs 18,000-22,500 crore). Now, that's a lot of aircraft, and a lot of money. And it's the laundry list of just one of the many private carriers in the Indian market. Vijay Mallya's Kingfisher Airlines, which flagged off operations last May, currently has eight Airbus A320s and three A319s, but clearly that's just not enough. Mallya wants at least 89 more planes by 2012.

It's not just Mallya who's thinking big (although his blueprint is easily the most ambitious). All the players who matter (and a few that still don't) have lined up aircraft acquisition plans from Airbus of France and Boeing of the us for the next four years (see Crash And Burn) that tot up to a mind-boggling $40 billion (Rs 180,000 crore). It's indeed one of the bravest gambits in industry. But if the blobs of red on the books of the carriers are anything to go by, the acquisition spree could also prove fatal in the years ahead. Industry observers are quick to point out that with cutthroat competition and fares, many airlines are losing money hand over fist, a few even resorting to sale of aircraft to stay afloat.

Siddhanth Sharma, Chairman of the six-aircraft Spice Jet, says there's no major crunch. "We have faced minor losses of $1-2 million (Rs 4.5-6 crore) in a bad month like March. In contrast, during the peak season between November and December we have been close to breaking even." Spice Jet plans to have an additional 32 aircraft by 2010, 28 of which are firm orders with deliveries expected as of December this year. If the remaining orders get confirmed the total investment would amount to close to $2 billion (Rs 9,000 crore). Sharma says a major portion of the funding will come from the US Exim Bank and "other debt options post May 2007 deliveries."

The established leader, Jet Airways plans to purchase 30 aircraft over the next few years for around $2 billion. What might make it easier for Jet is the track record of up-to-date payments it's created with us Exim Bank. Also, since Boeing accounts for 5-6 per cent of us exports, nearly 85 per cent of Jets deals are financed by Exim Bank, easing the Indian carrier's financing burden significantly.

Low-cost pioneer Air Deccan prefers to get its aircraft on leased contracts from GE Commercial Aviation Service, Singapore Aviation Leasing Enterprise and International Leasing Finance Corporation with whom it has a sell and lease back funding arrangement. GoAir too is opting for a mix of short-term and long-term leases. Says Jeh Wadia, Managing Director, GoAir: "This allows us flexibility to meet the market requirements; lease rentals vary completely based on tenure, timing and type of aircraft." Leasing rates typically work out to 10-12 per cent of the aircraft cost per annum, explains Spice Jet's Sharma. Currently with four Airbus A320s, GoAir expects to have 33 aircraft by 2008.

India currently has 170 commercial aircraft, and that number is estimated to hit 800-1,000 in four years. As air traffic grows between 25 and 30 per cent, more aircraft are doubtless needed. Says M.G. Mohan, Director, Finance, Air Deccan: "As more routes start developing this will call for increasing number of planes." Adds Wadia: "The airline business is a low margin large volumes business and scaling up is critical for long-term success." The question, though, is whether the ultra-low margin of the business today is conducive to future growth.