Date:30/06/2005 URL: http://www.thehindubusinessline.com/bline/catalyst/2005/06/30/stories/2005063000070100.htm
Back For a pie in the sky

Ashwini Phadnis

A clutch of low-cost airlines has begun battle while several more wait in the wings. Flights of fancy, or are they here to stay?

HAVE a holiday coming up and want to get out of town? Don't bother winding your way to the nearest railway station to figure out if you will get reservations. Instead, log on to the Internet or call your travel agent and decide which is the best flight for you and your family.

If you prefer the no-frills-attached experience, look at Deccan Air, or if you want to fly cheap and still have some in-flight comfort, consider Kingfisher Airlines. However, if you are the sort who prefers the tried and tested, then you can look at the fare deals on Jet Airways, Air Sahara and Indian Airlines. And if you are lucky you might just be able to pick up a ticket for Re 1 on Air Deccan.

Sounds unbelievable? Not really. Till early last year the domestic traveller, besides being able to fly on reduced rates offered by Air India on select flights, had only three airlines to choose from — Jet Airways, Air Sahara and Indian Airlines. Today, there are three other airlines operating in the Indian skies and if announcements by the others waiting in the wings are to be believed, there will be at least four more airlines flying soon.

The first of the new entrants to take to the skies was Captain G. R. Gopinath with Air Deccan. Then came Kingfisher Airlines, promoted by liquor baron Vijay Mallya and finally there is the latest — SpiceJet, promoted by Siddhanta Sharma, which launched operations just over a month ago on the Delhi-Ahmedabad-Mumbai sector.

Waiting in the wings are several big names of the corporate world — Jeh Wadia of the Bombay Dyeing group with his GoAirlines and Coimbatore-based textile major M. Thiagarajan with Paramount Airways. Paramount will operate the Embraer 175 and 170 aircrafts. With plans to start with five aircrafts by August this year, two of the Paramount aircrafts will offer an "all business class" service while the other three will have first and business class services.

There are enough reasons for this interest in the domestic aviation sector. To begin with, those in the business are expecting this sector to grow at a healthy 15-20 per cent per annum. According to the Chief Operating Officer, Jet Airways, Peter Luethi, no other market shows the kind of growth that is seen in India. "In the last 12 months, Jet Airways has seen an increase in passenger loads from 63 per cent to 71 per cent, which is significant, considering we have been able to increase the number of passengers carried with the same fleet of aircraft," he said.

One of the most significant reasons for the market picking up this fast has to do with reduced fares and more people having greater disposable incomes. Says Ajay Singh, Director, SpiceJet, "The reason that the domestic market did not grow earlier was because air fares were just too high. We are one billion people but there are just 15 million air trips a year. Compare this with Malaysia where with a population of 28 million people, there are 15 million air trips annually, or with China where 140 million air trips are made every year, and you will see the huge potential that is waiting to be tapped."

More players have gone on an aircraft buying spree. Little known IndiGo (promoted by InterGlobe) recently shocked the market when it came up with an order of 100 Airbus A-320 family aircraft at the Paris Air show. At the same show, Kingfisher announced that it would be acquiring five A-380 aircraft, each capable of flying more than 500 passengers.

To make the situation even better for those vying for a share of the domestic market, European aircraft manufacturer Airbus Industrie says that it is likely to get one or more airlines from India placing orders for the A-380 aircraft. In keeping with this demand, it had earlier estimated the aircraft requirement in India at 400 aircraft by 2023, but is now estimating a requirement for 570 aircraft worth $55 billion by 2023.

While lower fares are the biggest draw for new players, both the new entrants and the old hands are coming up with different approaches to lure customers. For instance, Kingfisher is likely to become the first Indian carrier to operate the double-decker A-380 aircraft (to be launched shortly by Airbus). And Paramount will have a first all business class service on its flights.

Airlines are also being positioned differently. While Kingfisher provides fares which are lower than those of Jet, Sahara or Indian Airlines, it comes with additions like personal video screens on every seat with ten audio and five video channels. Kingfisher, like several others, also provides in-flight refreshments — or which one has to pay for on an Air Deccan flight.

According to Singh, SpiceJet has positioned itself as a safe airline that flies state-of-the-art aircraft operating on time, and is low cost but not cheap. "We are creating a brand that is smart, young and dynamic and offers a pleasant flying experience at low cost," he says.

At the same time, Jet Airways is happy continuing with the model that it already has in place. Says Luethi, "We believe that the model we have will remain, with us being a two-class, full-service airline that will further leverage its domestic and international reach. Besides, the frequent flyer programme will be further enhanced along with flexible fares and Jet Escape packages that we will continue to offer more to the passengers."

The other full fare airline, Air Sahara, too has its share of packages for customers, as does Indian Airlines. Says Rono Dutta, President, Air Sahara, "While providing greater connectivity, we plan to target a few key cities, including Delhi, Kolkata and Hyderabad to meet the increasing demands of the passengers. "

In a sense, say industry watchers, the trend towards low fares in the domestic airlines sector started a few years ago when the then existing players — Jet, Sahara and Indian Airlines — came up with discounted fare schemes. Apex and super apex fares and discounted prices on advance booking of tickets are some of the schemes that continue even today.

According to former Chairman and Managing Director of Indian Airlines, Sunil Arora, these discounted fares are here to stay. While the offer of cheap tickets and the convenience of choosing between different airlines and flight timings will be welcomed by the Indian domestic flyer, there are other issues which need attention before flying really becomes comfortable. For starters, if you talk to any regular flyer today you will hear endless tales of how the flight just circled around waiting to land or how one had to wait endlessly in the aircraft before it finally took off because of the long queue of planes either waiting to take off or land. "At Delhi and Mumbai airports, ATC delays of 20 to 25 minutes are common," says a senior airline executive.

With new airlines entering the market every day, this situation will only get worse. Luethi agrees and maintains that if issues like ATC and fast exit ways from the runaway are not created, there could be a slow down in the growth in the sector.

There is also the issue of upgrading facilities at airports. The Government has got into the act and will be asking for bids to restructure and modernise the Delhi and Mumbai airports, which handle a large chunk of traffic. Work is already going on at these two airports to improve the existing facilities till the time the modernisation process is completed.

The Government will also be looking at converting 20 other airports into world-class entities. A high-powered committee headed by the former Secretary, Civil Aviation, K. Roy Paul, is working on steps that can be taken to reduce congestion in the skies.

Sahara's Dutta provides another word of caution about the future of domestic aviation when he says that the further upward movement in prices of fuel could shock the industry. ATF constitutes 30-35 per cent of the operating costs and an increase in its prices could burst the existing low-price bubble.

One is also worried that this boom could end on a whimper as it did in the early '90s when a host of airlines hastily opened shop but vanished in as much of a hurry. But for now, it is time to make hay while the sun is shining on the domestic flyers.

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