Is the Indian Aviation market about to crash?

[NGFellow]

Three paths to no-frills flight
Praveena Sharma
Friday, April 06, 2007 22:38 IST


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BANGALORE: These are desperate times for the low-cost carriers. And each one is trying to chart a different flight path to shore up yields and load factors.
If the oldest budget airline Air Deccan is looking at connecting metros to under-served cities, rival SpiceJet has decided to sub-lease two aircraft during the next lean season (July to September).
GoAir is taking the consolidation route and has focused completely on profitability. “Chasing market share is not economical. What we want to concentrate on is yields, people performance and productivity. Our strategy is being aggressive in the peak season and consolidating in the off-season,” said GoAir’s promoter Jeh Wadia.
In contrast, newest no-frills but fastest-growing airline IndiGo has aggressive expansion plans. By March 2008, it will expand its fleet to 18 aircraft. This, it wants to do by giving affordable fares without compromising on yields
Even Air Deccan, which has reached a fleet size of 40 aircraft (19 Airbus +19 ATR), has not plans of slowing down. By the end of this calendar year, the carrier would be adding 12 aircraft. “There are so many under-served markets. These markets give us better earnings as they have lower cost per available seat kilometre (ASKM) compared with metros. Our inaugural flight from Delhi to Dharamshala to be launched this month has been fully booked,” says Deccan Aviation chief revenue officer Samyukta Sridharan.
Today, of Air Deccan’s 333 flights only 80 flights are operated on the top eight metro routes - Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad, Ahmedabad and Pune. And Air Deccan is planning to chase these non-metro markets by offering attractive offers. This would be mean that it will continue to flood the market with discounted fares, which will be subsidised by ancillary income (non-passenger revenues).
This is reason Air Deccan managing director Capt G R Gopinath is keen on boosting the ancillary revenues to 25% in the next 2-3 years. But he is not alone. Every budget carrier has turned its attention to allied revenues.
SpiceJet, which till now had kept away from onboard food sale, is planning to start hawking snacks and beverages on its long-haul (more than two hours) flights from April 10. For this, it has tied up with Skychef.
“Foreign low-cost carriers like Ryan Air and EasyJet generate a chunk of their revenues from allied services. A major part of their ancillary income comes from selling alcoholic beverages on the flight but in India, we can’t do that,” says SpiceJet CEO and chairman Siddhanta Sharma. And this income has not just caught the fancy of Air Deccan and SpiceJet, it is being pursued by every budget airline.
But Air Deccan’s ancillary plans do not end there. Soon, it will be selling travel insurance, home loans, credit cards and tour packages on it website. SpiceJet, GoAir and IndiGo also have similar plans.
Currently, Air Deccan earns the highest ancillary income - 6.5% of its total revenues. It wants to take this income to 10% in the next 12-15 months. For SpiceJet and GoAir, it is 6% and IndiGo’s is 5%. While SpiceJet will take it to 9% by March 2009, IndiGo is targeting 15% by March 2008. Like ancillary revenues, SpiceJet’s plan for fleet expansion is also toned down. While IndiGo will have 18 aircraft in its fleet by March 2008, SpiceJet is aiming at 25 by March 2009.
GoAir, which scaled down its fleet from seven to five aircraft, will have 12 aircraft by the end of this year.




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[flightknight]

Deregulation of the airline industry in India has been a boon to the citizens of the country. Many of the current and future entrepreneurial startups will crash but the aviation sector is in its infancy. The second largest population in the world will need more aircraft to transport the wealthy middle class which is almost the population of the USA.
The coming years will consist of reconsolidation and the strongest will survive. There is also the possibilty of established foreign airlines with decades of experience who will be interested in tie -ups with indian airline companies.
The usage of non-indian pilots and management people could be a prelude of things to come.

[Amin]

The 300 milion middle class people in India are tired to taking the train, they want to fly. India has less than 250 total aircraft all the companies together. You do the math!!! There are airlines poping out every day in India. Few of these airlines will crash, but people want to fly and this market is not going down.

[CAPTAIN WOOBLAH]

India has great potential in so far as population and an emerging middle class in the hundreds of millions. There is no doubt that no matter what, the aviation sector will grow at a great rate. But there are a few things in my opinion that will put the brakes on Indian Aviation.

1) Can the infrastructure keep up with the demand (Slots, Bilaterals, airspace management, Air traffic control)
2) Can the red tape and bureaucracy be reduced.
3) Can corruption be curtailed.
4) The effect of the cast system on the middle class sector.
5) The effect of political favouritism on certain companies.
6) The availability of aircraft ( China is in a massive expansion mode )

Notwithstanding the above aviation in India is going to grow but I believe the Chinese factor has to be looked into. After all the Chinese are making Indian saries and selling them back to India!!!!!!!!!!!!!

Wooblah.:)

[speedtwoten]

CAPTAIN WOOBLAH, I'm completely agree with but you :ok: missed one point the pilot mentalility:{ please check SAHARA AIRLINES with Capt. Sumit Kapur :mad: as in charge as GM for Project & Planning can anybody explain what this company achieved compare to Jet Airways?????

[willfly380]

isnt he x jet

[FerrypilotDK]

IMHO

1) Can the infrastructure keep up with the demand (Slots, Bilaterals, airspace management, Air traffic control)

Doesn´t look good. Just look at Mumbai, where arrivals, departures and trans-Asian flyovers are all handled by the same controller! (In fairness, they do an amazing job, given the circumstances!) Or the "new" terminal that has stood vacant for what now? 10 years???

2) Can the red tape and bureaucracy be reduced.

This is India you are talking about! Be serious! The government just imposed a 25% tax on non-airline aircraft...with no warning! Several aircraft have already been paid for and on the way to India. The new owners are in between a rock and a hard place, as they have received National Bank permission to use hard currecy for these aircraft. They have an obligation to import them. BUT if they bring them in...25% more! Even for the smallest CJ, used, that means 1 million dollars. A Falcon 900 perhaps 7 million! :ugh:

On my last trip, I had delivered and was leaving again on a temporary landing permit. The immigration man was hassling me because his colleague at arrival "hadn´t made the TLP correctly." It took 30 minutes and 8 men to handle this crisis. Bureauocracy is either an ancient Sanskrit word or the landmine that the Brits left behind to screw things up!:bored:



3) Can corruption be curtailed.

See response to number 2! Customs is a road to riches. Can´t make a move without delays on all levels, until a donation is made somewhere. I refuse to do this and have waited 3 days for a departure. It is my little war to help end corruption by not taking part in the payoffs. But it does tax the patience!

4) The effect of the cast system on the middle class sector.

The caste system is illegal, right?

5) The effect of political favouritism on certain companies.

You mean that my friendly government minister, the one with the brown envelope, is no longer able to assist me, his old chum from school? :=

6) The availability of aircraft ( China is in a massive expansion mode )

..not to mention the availability of pilots! Ah well.......at least the skies will be safe. What about fuel? Can the world oil supply handle the rate of grwoth in both China and India at the same time as the West increases activity? Not to mention the Middle Eastern airlines that also are in growth mode!

Interesting times!

[blrsea]

4) The effect of the cast system on the middle class sector.


Are you from India or working in India currently? I am just curious by your statement, which is usually from a christian evangelist or an uninformed person. If you are in India, do you know the castes of all people working with you? Do you think the companies ask for caste information before recruiting their employees? Can you identify the caste of a person by looking at them?

It is as stupid as saying that racial relations will determine whether US airlines will come out of bankruptcy or not.

I am surprised people bring in unrelated issues which they probably have just read about in some book.

[flightknight]

By the way, its spelt "caste", english please - especially if you want to work in India. NO !!! for pilots the only caste is a type rating and 500PIC. The caste system does exist in India, but I don't know its relevance for discussion on this forum. I guess a better education will direct an individual to the right forum to discuss their personal issues.
:ugh:

[CAPTAIN WOOBLAH]

Jeeze Flightknight & blrsea, seem to hit a nerve with you here. I stand corrected it is spelt CASTE...................!!:ugh:
Regarding your statement that it (caste) is irrelevant in Indian aviation and that all that is required is 500PIC I reckon that if you are a national and Daddy managed to fork out the $$$$$ for you to attend a flying school then caste would be a non-issue.:cool:
Regarding it relevance to Indian aviation (as you have stated it does exist) then it is what will hinder the growth of the middle class which will stunt the growth of domestic and international seat factors which will negate the rapid growth of the airline sector.
Recently there was protests regarding allotment of space by the government to lower caste Indians at a premier medical college in India. It is precisely this mentality that will put the brakes on the aviation growth factor. How many call centres can you have to grow the wealth of the average Indian.:rolleyes:

[blrsea]

Regarding your statement that it (caste) is irrelevant in Indian aviation and that all that is required is 500PIC I reckon that if you are a national and Daddy managed to fork out the $$$$$ for you to attend a flying school then caste would be a non-issue.

Wow, your knowledge about caste system is astounding:rolleyes: I am not in aviation, but having studied and working in a major company, I know what I am talking about. There are plenty of low caste people who are rich. In fact, since our independence 60 years ago, India reserves 22.5% of seats in all government run/aided schools/colleges for the lower caste people. And same is true in government employment too. And the requirements are relaxed for lower caste people in schools/colleges and employments too.

[flightknight]

Golly !!! are there any aviation professionals who can address NGfellows original post ?.....:=

[divinesoul]

well just on a side note Jet Airways has bought Air Sahara and rebranding is being done, with Air Sahara being the called JetLite,the new LCC subsidary of Jet.

Well the first airline to fold up is Indus Airways

Jet airways saved Air Sahara from the rut.


Who is next? :confused:

"GO AIR":( :O :D

[flightknight]

Indus Air stops operations
Indus Air, a regional airline, has suspended operations from last week, just three months after its commercial launch.
Sources from the government said financial problems had led to the suspension of operations. Operated as a full-service airline from mid-December 2006, Indus Air was promoted by liquor company Mohan Meakins.
In the 1990s, the country had witnessed Damania Airways, East West, NEPC Skyline, ModiLuft and Archana Airways winding up operations, owing to increased competition and lack of government support.
At present, there are nine domestic scheduled passenger airlines -- Indian Airlines, Jet Airways, Air Sahara, Air Deccan, Kingfisher Airlines, SpiceJet, Paramount Airways, GoAir and IndiGo apart from Indus Air.
According to the industry analysts, domestic airlines are expected to make a cumulative loss of Rs 1,800 crore to Rs 2,250 crore in 2006-07 in the overcrowded Indian aviation space.
Indus Air Director Krishnan Gopal Beri confirmed the suspension of commercial operations. “We have suspended operations temporarily owing to the shortage of spare parts. We have requested aircraft leasing company GE Commercial Aviation Service (GECAS) to avail parts of Bombardier aircraft. Safety is the most important aspect and the moment we get the necessary spares, we will start operations,” Beri told Business Standard.
An airport representative of Indus Air said the passengers who had booked tickets in advance would get refunds.
Indus Air, which holds a scheduled operating licence, was connecting feeder routes such as Amritsar and Chandigarh to Mumbai and Delhi with two 50-seater Bombardier CRJ 200 aircraft. The airline served food and other facilities during travel unlike budget carriers.
A senior government official pointed out that the airline had failed to pay lease rentals of its two aircraft, which led to cancellation of registration of the aircraft. “The ministry of civil aviation will take a final call on the licence status of Indus Air considering the changed norms of operations,”the official added.

[teghjeet]

Pls do not resort to bickering.
There are lobbies in this contry aligned on lines of Religion, Nationalities, Legacy cariers, Military etc, and maybe amongst them a few along caste lines. The Brits left a policy of Divide and Rule along with the beaureaucracy, etc.

As regards companies folding, Indus folded bcoz he did not pay the lease company which approached DGCA that they would take the ac back, which the regulator granted.
There is another one which is MDLR with the BAE 140 which may collapse. IMHO no real MArket for a 4 engined small jet. Along with Jagson Airlines a n operator having DO 228 w/O autopilot, (What will the Pilot do if we have an auto pilot??? fm Mgt) That is bcoz of shortsightedness of Owners/ Mgt who siphon the funds, show losses to negate TAx liability and then fold quietly.

[flightknight]

http://economictimes.indiatimes.com/Hot_Links/Earnings/Air_Deccan_posts_Rs_212-cr_loss/articleshow/1962514.cms

MDLR Airlines : Just wondering who advised these folks on their current fleet choice. This is a cash burning a/c, especially with the extensive ground opns due to congestion. Was there any due diligence preceeding this purchase ?.:(