Malaysian low-fare international carrier AirAsia Berhad last week declared it would “rock and paint the Indian skies red” by adding six direct flights to five new destinations in the country between 17 May and 4 August 2010.
AirAsia’s move to add Chennai, Bangalore, Hyderabad, Mumbai and Delhi to its existing portfolio of Indian cities is part of a growing trend. Foreign airlines are cautiously adding capacity on their India routes over the next six months, after having burnt their fingers in early 2009, a year that Giovanni Bisignani, director general and chief executive of the International Air Transport Association (Iata) said “…goes into the history books as the worst year the industry has ever seen”.
Flight plan: Singapore Airlines is among those increasing their presence in India by adding more flights. But the spurt in capacity by foreign airlines could hurt domestic carriers that have international operations. Bloomberg
Among airlines that are increasing their presence in India are Singapore Airlines (adding three flights a week), Austrian Airlines (one flight a week), Emirates Airlines (eight a week), Qatar Airways (seven a week), Cathay Pacific Airways Ltd (four new flights in May and three in July), Deutsche Lufthansa AG’s Swiss International Air Lines Ltd (two a week).
“By boosting connectivity for Indian travellers from key gateways, our aviation group responds to encouraging demand trends in this strategic market,” said Axel Hilgers, Lufthansa’s South Asia director.
Graphics: Ahmed Raza Khan / Mint
The timing of the additions to capacity and destinations coincides both with a recovering economy and a buoyant performance by most domestic airlines. “We are back in action. Loads are back. Demand is up. However, yields are a bit sticky and we see that returning only this year,” C.W. Foo, general manager (India) for Singapore Airlines told Mint.
“Profitability will be a factor. Why pump in capacity on non-profitable routes?” he said, adding that the airline does not plan to add capacity on routes other than Mumbai and Delhi.
Singapore Airlines will operate twice daily to both cities beginning March and June, taking its total flights to 14 a week.
The spurt in capacity could hurt domestic airlines that have international operations as well. India’s second largest airline by passengers carried, Kingfisher Airlines Ltd, which currently connects seven international destinations, plans to utilize a narrow-body fleet on short-haul markets in West and South Asia.
The country’s largest airline Jet Airways (India) Ltd has virtually put all long-haul overseas expansion on hold, focusing instead on short-haul international destinations. National carrier Air India (run by National Aviation Co. of India Ltd) discontinued many flights to international destinations last year.
Meanwhile, other domestic carriers including SpiceJet Ltd and InterGlobe Aviation Pvt. Ltd-run IndiGo are preparing to offer international routes in fiscal 2011.
“If international carriers dump capacity in India, it will lead to irrational competition and harm both Indian and international carriers. Hopefully, this time they will not dump as much capacity in India (as earlier),” said a senior executive with a private carrier that has international exposure. He did not want to be identified as he is not authorized to speak to the media.
According to a December report from aviation consulting firm Centre for Asia Pacific Aviation (Capa), international traffic to India is expected to grow at 10-12% in fiscal 2011. The report added that premium volumes and revenue are likely to recover faster ex-India than in in-bound flights. That means more Indian residents are likely to travel overseas than foreigners coming to India.
Amalendu Purandare, India operations head of travel portal Arzoo.com, said the anticipated new capacity, especially by Western airlines, was “more to do with the revival of economy in those countries, rather than the situation in India”.
Besides, the worst may not be over yet, at least in terms of profitability. In January, Kuwait’s Jazeera Airways KSC discontinued its Mumbai operations citing profitability as a concern.
“We have permanently lost two-and-a-half years of growth in passenger markets and three-and-a-half years of growth in the freight business,” said Bisignani of Iata, which represents about 230 airlines that account for 93% of scheduled international air traffic.
“The industry starts 2010 with some enormous challenges,” he warned in a 27 January statement. “The worst is behind us, but it is not time to celebrate… airlines face another spartan year focused on matching capacity carefully to demand and controlling costs.”
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