Air-India to launch intl discount airline in 2005

[rotornut]

Reuters
Air-India to launch intl discount airline in 2005
Monday May 31, 2:34 am ET


NEW DELHI, May 31 (Reuters) - India's international flag carrier, Air-India Ltd , plans to launch a new discount airline in April 2005 to boost its share of the key Gulf and Southeast Asian markets, its spokesman said on Monday

Jitender Bhargava said the new airline will be a wholly owned subsidiary of the state-run carrier and would fly from New Delhi, Bombay, Madras and the southern state of Kerala using a fleet of 14 leased Boeing 737-800 (NYSE:BA - News) planes.

"The aim is to have about 25 percent lower fares than offered by other international airlines," Bhargava said.

India has a large expatriate population working in the Gulf countries and has decade-old ties with Singapore and Hong Kong which drives air travel to the two regions.

The Gulf routes are also some of Air-India's most profitable, but the airline faces stiff competition in these markets, especially from discount airline Gulf Traveller launched by Bahrain-based Gulf Air in June 2003.

Bhargava said Air-India's board approved the plan for the new airline last week which will now be sent for government approval.

Bombay headquartered Air-India, whose privatisation was abandoned in 2001 due to lack of investor interest, has steadily lost market share to foreign airlines over the past 10 years because of its inability to increase capacity.

In October, its board approved the lease of two Boeing 747-400s and two Airbus A310s (Paris:EADS.PA - News) to increase services to Europe and the United States and begin flights to Shanghai. Those inductions would increase its fleet to 33 planes.

Air-India also has a plan to buy 10 Airbus A340 and 18 Boeing 737-800 planes as part of a five-year $2.2 billion fleet expansion and renewal programme, which also awaits government approval.

The 14 planes to be inducted by its subsidiary will be over and above Air-India's own purchase plan.

India's new aviation minister Praful Patel said last week he wanted to strengthen the two state-run carriers, Air-India and the mostly domestic Indian Airlines Ltd .

[uy707]

It will be intersting in seeing how this one will fare as around the corners are two efficient competitors namely Jet Airways and Sahara, which will tune up in the meantime !
Alain

[rsoman]

Air Sahara and Jet Airways are predominantly domestic airlines. They have just been given permission to start operating to neighbouring countries alone (like Sri Lanla - both fly to CMB) as well as Katmandu and Dhaka.

These private operators are not given rights to operate other international routes from India.

The low cost airline Air India is planning to start is targetted at the highly price sensitive market from India to Middle East where there is a huge expat Indian labor traffic as well as to South East Asia esp SIN and KUL where a lot of VFR traffic as well as some migrant traffic exists from South India. In both these markets, esp the former Air India is under attack from literally every middle east carrier ranging from Saudia to Qatar not to speak of Emirates as well as SriLankan who all carry traffic both under third/fourth freedom as well as thinly disguised sixth freedom arrangements .

The recent open skies agreement with countries like Sri Lanka has been in particular a blow to Air India as it has opened up markets lfrom destinations lik CCJ (wich previously no foreign carrier was allowed to operate) to Sri Lankan. There is no traffic to speak of between Sri Lanka and CCJ , all the traffic as I said previously is sixth freedom to the gulf, hitherto an exclusive duopoly in CCJ for Air India as well as govenment owned sibling Indian Airlines, who in addition o an extensive domestic network operates a lot of flights to Middle East and South East Asia as well.

But the real impetus I feel for this move from Air India has come from the threat of the succesful low costs like Air Arabia as well as Air Asia in Malaysia. Air Arabia is already openly demanding entry to the Indian market, and once these two players are allowed to come in, Air India would see these high volume taffic routes literally wiped away from under their feet.

Hence undet the circumstances this is a good move by Air India. However it is successful will to a large depend on to what extent the political busybodies in the governemt as well as the governemnt bureaucrats in the aviation minstry many of whoml consider themselves to be the ulitmate airline managers will allow the professional and higly competent management of Air India to get on with the job in hand.

Anyway interesting times ahead. Six monts ago we had the first domestic low cost in Air Deccan, who are very much alive and kicking and soon we are going to have the International low cost as well. About time too for the Indian traveller!