BY OUR AVIATION CORRESPONDENT
May 13, 2005: In a move that will increase competition in the already crowded Indian aviation sector, state-owned Indian aviation major Air-India and its recently-launched subsidiary Air-India Express are to begin services in the domestic sector in the next one year, a mode that is required to sustain demand and support its overall operations.
“We are looking launching services in the domestic sector to help in meeting demand in India and facilitate our hub and spoke operations,” A-I Chairman and Managing Director V Thulasidas said in a press conferece recently.
Hub-and-spoke is a concept whereby an airline would select an airport or destination as its hub and operate from that location, while other destinations would be considered as spokes. The aircraft would always return to the hub, and carriers normally have multiple hubs at multiple locations.
With airlines in India opting for international operations, services in the domestic sector is important to ensure connectivity to international airports from specific small airports in the country. This would directly help in sustaining the revenues of the carriers global services and passengers would opt for connectivity flights of the same carrier for convenience.
Ticketing agents would also opt for this model as booking more tickets on the same airline increases their overall commission, not to mention the ease of going only to one airline’s offices for tickets, rather than running around to a number of offices, airline industry analysts said.
This is move is also slated to slated to sustain its revenues and passenger load, they said.
According to Thulasidas, Air
India is seeking requisite approvals for commencing of the operations and expects to begin it in a year’s time.
The state-owned carrier, till date does not have domestic operations, which is taken care of by Indian Airlines, another state-owned airline.
The airline is also planning to increase its cargo offtake from the country and is to convert a couple of A 310s to A 320s. However, the converting would take sometime as there is only one converting center in the world and there is huge demand for conversion of aircraft.
“We got a schedule for take the aircraft for conversion in 2007. We are talking with these conversion facility and seeking if there is any possibility of advancing the conversion dates,” he said.
A-I would also increase its fleet size to 75 aircraft in the next three years from the present 42 aircraft it would have by the end of July this year after the roll out of Air-India Express.
Air-India Express, a budget aircraft operating between Kerala and Gulf, has placed orders for 18 aircraft, which would be taken on dry lease, while the recently commenced airline has been registering a 95 per cent load factor during the last few weeks.
Air-India is also planning an Initial Public Offering (IPO) to it raise funds for further aircraft acquisitions and organic growth, which would also help in “ushering in a new corporate culture”.
The IPO is expected this year (2005) and with becoming a listed company, “we would be answerable to Securities and Exchange Board of India (SEBI) and other regulators, helping us raise our standards in many fronts, including corporate culture and governance,” he said.
The carrier has also other methods for raising funds. For the acquisition of the proposed 50 aircraft (Air-India is acquiring 50 aircrafts from Boeing with an estimated cost of $60 million), the carrier had raised funds from international markets, including the Exim Bank of US, he said.
On the acquisition of 50 aircraft from Boeing, Thulasidas said that the airline expects to get governmental nod “immediately”.
A-I also intends to increase its fleet size to 75 aircraft in the next three years, from the present 42 aircraft it would have by the end of July this year. The increase in aircraft would be due to the increase in business and travel experienced in the country.
BY OUR AVIATION CORRESPONDENT