IndiGo going steady as smaller newcomers turn profits, other airlines still plagued by cumulative losses.
Due to the extremely competitive fare structures offered by bus operators and Indian Railways, AirAsia is making losses on its Bangalore-Chennai run. However, on the other four routes that it operates, it is making a profit. This was disclosed by Mittu Chandilya, CEO of AirAsia, on the sidelines of the SITA India Aviation Forum recently.
AirAsia, the low cost, no frills carrier, has two flights daily from Bangalore to Goa and covers Cochin, Jaipur and Chandigarh, and all these routes are in profit. Air Asia expects to announce two new routes and the service is expected to begin in November.
According to Mittu Chandilya, they plan to induct 10 more aircraft next year, taking the total fleet to 15, it currently operates 2 Airbus A-320s. Originally, they had planned to cover only tier II and tier III towns and cities, but due to intense competition, they may break ground to cover wider territory. New Delhi is most likely to be the next airport they will look to cover. Details are expected shortly.
While IndiGo has been making waves this year, they have already declared a profit for the year ending March 2014, which is the 6th continuous year of profits. They have plans to embark on a mammoth expansion plan, thanks to the $ 2.6 billion finance from the Industrial and Commercial Bank of China, for purchasing 30 aircraft.
Air Costa, which has been operating from Andhra Pradesh for almost a year now, has started posting profits since a few months and expects to post a net profit at the end of the current financial year, according to its Chairman, Ramesh Lingamaneni. It has been reported in the press that they have an average passenger load factor of 71% and utilization was 9.5 hours a day. For Embraer E-170s 78-seater, it was 7 hours and for E 190s, 112-seater, the utilisation was 14.5 hours, according to press reports. Soon, they plan to set up MRO - maintenance, repair and overhaul facilities.
Air Costa has ambitious plans on the anvil. They have applied to DGCA for going national, and shed their regional tag, besides going in for international routes. However, the present 5/20 rule may be an obstacle, which the existing older domestic counterparts do not want withdrawn or waived.
In the meantime, Air Costa has entered into a MOU with Viet Jet, the 2nd largest private airline in Vietnam, "for exploring future opportunities of working together, covering code sharing, partnership and financial collaborations." This was done during Vietnamese Premier Ngyugen Tan Dung's visit to India, a couple of days ago.
Both Jet Airways and SpiceJet have reported losses recently. Although Jet Airways received $900 million from Etihad Airways, they would need more funds to keep afloat. It may be recalled that Etihad bought a 24% minority stake in Jet Airways in November 2013, but with the endless fare wars that these airlines have got into, it is unlikely that they will see profits in the near future. On the top of these, their advance booking for various aircraft would become an additional burden when they arrive unless they are able to secure great increase in the passenger load.
Meantime, Minister Ashok Gajapathi Raju has been able to get the tax on aviation turbine fuel reduced in some states, but uniformity at a national level has not been achieved. Additionally, high airport charges at metros are a damper, but like Air Asia has now changed its mind, others may decide to fly in and out of metros.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
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