Page 25 - AAA MARCH - APRIL 2015 Online Magazine

FEATURE AVIATION BUSINESS
If successful, AirAsia India
and Vistara will undoubtedly
reinforce the attractiveness
of the Indian market for
foreign investors and may
open the doors for more
overseas carriers
WWW.ASIANAIRLINES-AIRPORTS.COM
movers,” Air Asia founder Tony Fernandes AirAsia India, which currently operates
had said before the launch of AirAsia India with three aircraft, seems to have captured
last July. the market as it hopes to break even in the
The Malaysian low cost carrier was the first half of this calendar year.
first foreign operator to enter the market “We expect to take delivery of the
since the Indian government, in 2013, fourth aircraft by March. We are already
allowed international carriers to own up cash flow positive and are expecting to
to 49 percent of domestic airlines. This break even, anywhere between May to
was followed by Singapore Airlines-Tata June. AirAsia India will hit break even
joint venture Vistara, the third full-service the moment we hit sixth plane,” Chief
carrier in India now, after state-run Air Executive Officer of AirAsia India Mittu
India and privately-owned Jet Airways. Chandilya said.
“India’s aviation market has been The two new airlines have already
expanding and we have been eager to unleashed intense competition amid
participate in it,” said Nicholas Ionides, rising costs, high jet fuel taxes, poor
the senior vice president of public affairs traffic growth and a weak rupee plaguing
at Singapore Airlines. the industry. Analysts fear that the launch
If successful, AirAsia India and of the new carriers at a time when the
Vistara will undoubtedly reinforce the industry is bleeding may push the sector
attractiveness of the Indian market for further into the red.
foreign investors and may open the doors “With new airlines coming in and
for more overseas carriers, particularly existing airlines being financially in dire
from the Middle East to explore straits – everyone is vulnerable, except
opportunities for strategic tie-ups with IndiGo,” said Kapil Kaul CEO, South Asia at
existing local carriers, in a bid to attract the Centre for Asia Pacific Aviation (CAPA).
more Indian passengers for their own In the last seven years, Indian carriers,
international networks. including the state-owned Air India and
Abu Dhabi’s Etihad Airways has already the now-grounded Kingfisher Airlines,
purchased a 24 percent stake in Jet Airways, have lost a combined total of over $10
India’s largest publicly-listed carrier, while billion after years of below-cost ticket
cash-strapped low cost carrier SpiceJet, pricing and overambitious expansion,
has been claiming that it is in preliminary according to the CAPA.
talks with several potential partners over a India currently has one state-owned
stake sale, though it has not identified any airline – Air India – and six major private
of its suitors. airline groups - IndiGo, Jet Airways,
In entering the market, any new airline SpiceJet and GoAir - including the two new
will be competing for many of the same joint ventures, Vistara and AirAsia India.
travellers with the existing local airlines “Over the next 18-24 months we
and will have to fight aggressively to carve anticipate consolidation in the sector. We
out their market share. don’t expect more than four strong pan-
While, AirAsia India has placed itself India carriers. The others will operate as
as a low-cost carrier to connect smaller niche players or collaborate with the larger
cities, aimed at providing feeder routes players,” noted Amber Dubey, partner and
for its international services, Vistara head of aerospace and defense at KPMG
serves as a full-service carrier aimed at in New Delhi.
capturing customers from the country’s The impact is already visible as Jet
growing middle class. Airways, a direct competitor to Vistara,
Vistara started operations in January scrapped its low-cost operations and
and has plans to offer 87 weekly flights revamped its fleet to focus on a premium-
during its first year of operation. The new class product.
airline has taken delivery of two Airbus Vistara Chief Executive Officer Phee
A320-200, and aims to add to its fleet five Teik Yeoh said, “We are confident we
aircraft by the end of the year, and 20 by its have what it takes to make a significant
fifth year in operation. difference in this market, and we will be
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