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BY OUR AVIATION EDITOR
4th January 2006
 Indian aviation business, which took
wings in the year gone by, continues to grow by leaps and
bounds. More airlines launch flights, more investments are
made. Is this a never-ending boom? A crystal-gazing finds that
not all may be rosy in the Indian skies this year.
We are likely to see the launch of many new airlines,
including Premier Airways, IndiGo, Star Air and East West
Airlines this year. The first of these, Premier Airways, is
formed by a group of ten NRIs in the US. The airline will be
based in Chennai. Premier Airways has already applied for DGCA
permission to operate flights. Premier Airways expects to be
afloat by late this year.
Premier Airways is expecting to connect all major metropolises
in the country with Chennai. Premier plans to start flying
with five aircraft, which will be expanded to 20 aircraft
later. The airline is billed as a low-cost carrier.
The second major airline to hit the skies in 2006 will be
Indigo. Indigo, a name which was rather unknown earlier, had
made a splash at the Paris Air show by placing an order for
100 Airbus aircraft. Indigo is expected to start operations in
February 2006, with leased aircraft to begin with. The
delivery of Airbus planes to Indigo will start only September
this year. Indigo is hoping to get all the airplanes between
2006 and 2016. The total cost of all the aircraft is pegged at
around six billion dollars.
According to Indigo Airlines promoter Rahul Bhatia, the
company will start with a promoters' equity of $80 million
which will be expanded to $250 million later. Mr Bhatia is
managing director of Interglobe Enterprises, the company
behind Indigo Airlines.
Indigo Airlines will operate on both metro and non-metro
routes. According to the company, the fares will be about 40%
less than that of full service carriers and similar to that of
low-cost airlines. Indigo Airlines plans to take Air Deccan
head on with a bigger fleet and competitive fares.
Though no details are available, some more names doing the
rounds include Yamuna Airways, Indus Air, Magic Air and
Crescent Air. These airlines also may take to skies this year.
Out of these, Indus Air has already received a no-objection
certificate from the DGCA.
Meanwhile, the Nira Radia-promoted Magic Airlines has not
taken so far. Magic Air had planned to launch low-cost flights
by the end of 2005. The company has sought a no-objection
certificate from Ministry of Civil Aviation for this purpose.
The company plans to launch its airline under he brand name
Magic Air.
The Delhi-based Magic Airlines plans to invest about Rs 180
crore into the project. The company is headed by Nira Radia,
the entrepreneur behind Vaishnavi Corporate Communications.
Magic Air plans to start low-cost flights with an initial
fleet of ten aircraft.
Eastwest Airlines is also expected to make a comeback this
year. Eastwest, which took wings in the early 90s, folded up
in 1998. Its promoters now plan to relaunch the airline in a
low-cost avatar.
However, development of airports in India has not kept pace
with the mushrooming of airlines in the country. The upgrade
of international airports has been hanging fire for a long
time. The planned upgrade of international airports at Delhi
and Mumbai has not moved for a long time. Bidding for the
airport upgrade produced only two consortia as eligible - one
led by Reliance and the other by Fraport. The government,
cagey over just two bidders fighting for the project is
wondering whether it should scrap the process and go for
another round of bidding to include more candidates. According
to Attorney General Milon Banerjee, there is no harm in going
ahead with the bids, though there is no final decision on this
so far.
2005 witnessed Jaipur and Pune airports being elevated to
international airport status. However, projects like Nagpur
international airport, Bangalore International Airport and the
New Bombay international airport projects are dragging on. The
aviation infrastructure of the country is bound to come under
severe strain in 2006.
This was amply clear when thick fog descended on Delhi during
late December. Numerous flights had to be cancelled many
others delayed. Travellers of low-cost airlines, which rely on
fewer aircraft to operate more services, were hit the hardest.
Skies crowded with planes, waiting for landing signal.
This led to the civil aviation ministry cracking down on
airlines many of which do not have pilots trained in CAT-IIIB
landing system. If pilots were thorough with this system, more
flights could have landed and taken off during the trying time
in Delhi. The government has granted an year's time to private
sector airlines flying to Delhi to train their pilots, or stay
off Delhi during fog. However it seems unlikely that many
startup airlines will be able to train their pilots in the
high-tech instrument landing system in such a short time.
Meanwhile, expect pubic sector airlines to take the heat from
the aviation boom. There is a crippling shortage of pilots,
commandants, ground staff and cabin crew for every airline.
The savvy private operators poach trained staff from low-paid
sarkari airlines, which are left in the lurch. Very
recently, a bunch of pilots from Air India Express put in
their papers to force the management to hike their wages. Air
India had no option but to bow to their wishes.
Airlines are adopting several techniques to maintain adequate
trained personnel. Some, like Kingfisher Airlines are setting
up pilot training academies, while many others are entering
into anti-poaching agreements to prevent staff exodus. Some
others make water-tight contracts with their recruits, to
prevent them from joining rival airlines. Besides, airlines
increasingly resort to recruiting pilots from abroad, who,
despite their higher price tags, are not seen as easy poaching
targets.
Even at the top levels, many airlines are recruiting expats to
head corner offices. Go Air, Jet Airways, Kingfisher and
SpiceJet have turned to videshi hands to man their
operations. Some of them have resigned and left, yet it is
clear that we will see more expat CEOs heading Indian airline
companies.
The mushrooming of low-cost airlines is expected to place an
increasing strain on the margins of conventional airlines like
Indian Airlines, Jet and Air Sahara. Globally, legacy airlines
take on discount fliers in three ways: 1) by reducing fares to
match no-frill airlines, 2) by launching more international
flights where low-budget airlines cannot compete, and 3) by
launching low-cost subsidiaries which take on the rivals. We
can hope to see the same in Indian skies.
However, with may be the exception of Air Sahara, Indian
aviation scene is not likely to see any major consolidation.
The airwave has still to reach its peak, beyond which alone
one can expect consolidation to step in. As of Air Sahara, its
promoters have been looking to offload stakes for quite some
time, even before the new low-cost airlines appeared in the
skies. One can expect a chunk of Air Sahara (or may be the
whole) changing hands this year. But beyond that, other
consolidation moves remain unlikely.
BY OUR AVIATION EDITOR |
