Level flight: Charting India's airline course

Last month, Jet Airways introduced wide-body services on two of its busiest domestic routes — Mumbai-Delhi-Mumbai and Delhi-Kolkata-Delhi — in a move that significantly enhanced connectivity, besides boosting capacity on these key sectors.

The double-aisle Airbus A330 that was deployed, puts the airline in a niche club of Indian carriers that boast of such large aircraft (Jet Airways has Boeing 777s too), enabling them to fly long routes, non-stop. Only in this case, the airline found huge demand in the domestic market itself, compelling it to ply one of its big boys.

According to Jet Airways Chief Commercial Officer Jayaraj Shanmugam, “The Indian domestic sector is witnessing breakneck growth in demand. Our fleet mix comprising both wide-body and narrow-body aircraft is our strength, and helps us respond to market conditions and provide enhanced travel options to our guests.”

Joining Jet Airways in the wide-body boat is flag carrier Air India, which boasts of wide connectivity to Europe and the US, thanks to its fleet of Boeing 747s, 777s, and 787s. Air India Chairman and Managing Director Ashwani Lohani says, “Our profitability mantra is ‘fill more, fly more!’ We are bullish on increasing occupancy and flying to more destinations.”

Indeed, India has taken off to a flying start with a burgeoning airline industry. The sector has opened to a big blue sky of opportunities, owing to a series of measures taken by the government, along with the economy itself welcoming several trends that have propelled it further.

Amar Abrol, the CEO of young budget carrier AirAsia India, explains that India’s civil aviation industry is on a high-growth trajectory. “India aims to become the third-largest aviation market by 2020, and the largest by 2030. Factors such as low-cost carriers, FDI in domestic airlines, advanced IT interventions and growing emphasis on regional connectivity have given a new lease of life to the growth of the Indian aviation sector,” he opines.

Despite such high scope for growth, the airline industry throws many questions that require some deep thought and analysis. It is imperative to understand the uniqueness of this market, as well as introspect its challenges, and find solutions.

Fleet-finding mission
Firstly, except for Jet Airways and Air India, it is interesting to note that while India’s airline market is huge, mostly narrow-body, single-aisle aircraft supply the demand. Vinod Singel, Founder and Managing Director of aviation consultancy Aerosource India, tells DH that while it is a strategic decision to fly certain aircraft in certain sectors, the idea is to ensure up to 100% load factor at competitive costs.

“What you don’t want is flying at 50% load factor. If a Boeing 787 with 250 seats sees 50% load factor, it’s as good as 90% on a smaller 737. The plan is to see all operational costs become less,” he explains.

Load factor plays a major role for an airline in ascertaining flights on a particular route, post which, it would determine the right aircraft fit for the journey, after gauging all economies of scale and other required considerations.

Basically, with more traffic on a particular route, given the demand, an airline may decide whether it would want one large aircraft carrying more passengers on fewer flights, or several smaller aircraft carrying the same number of passengers between them on more flights. Hence, airlines that have dedicated demand on specific routes opt for one or two types of aircraft as feasible to fulfil it. Recently, Emirates moved to an all Airbus A380 and Boeing 777 fleet, in line with its vision to offer superior passenger experience, and improve environmental performance.

“When you have one type of aircraft, there is commonality in the crew required to fly it,” Singel says. For instance, if an A330 belonging to a small fleet develops a snag, finding a replacement aircraft or crew easily could be challenging.

Flying home
With regard to India, experts have exuded immense confidence in the domestic sector opening up in a big way. A number of routes have unlocked themselves on the country’s map, and carriers want to find them.

Over the last few years, India has seen a rise in the number of regional carriers that have come into existence. In May 2016, domestic air passenger traffic rose 21.63% to 8.67 million, from 7.13 million during the same month, last year. Passenger traffic during FY2015-16 increased at a rate of 21.3% to 85.57 million, from 70.54 million in the FY2014-15. In March 2016, total aircraft movements at all Indian airports stood at 160,830, which was 14.9% higher than March 2015. India is among the five fastest-growing aviation markets globally, with 275 million new passengers.

“The current domestic market itself is so large that homegrown carriers will first want to tap it,” Singel says. And for connecting towns within the country, airlines (especially budget ones) mostly fly single-aisle aircraft.

Sharing AirAsia India’s strategy in the country, Abrol says, “Currently, we operate eight A320 aircraft across our domestic network, which offers a range of over four hours flying. So, anything that comes within that radius from cities in India, we will try and connect to. We will focus on strengthening our presence in India, before we scale our operations to fly international.”

To further guess the emphasis that carriers have laid on India’s domestic airspace, one must note that market leader IndiGo — which also flies international, and operates one aircraft type — ordered 250 A320neo planes from Airbus, last year.

Do you see the runway?
While the Indian airline industry is seeing its share of domestic successes, one cannot ignore few important facts. A major issue surrounds connectivity, both in terms of infrastructure and reach.

To put it in perspective, the population of India is 1.25 billion, compared with the US’ 300 million. Yet, the former has only around 400-450 airliners between its different carriers, compared with the latter’s whopping 4,000.

“Today, only 60 out of the 400 available airports in India have fully-functional infrastructure — 24X7 services, night landing facilities, new terminals, security, and logistics. If new airports open, there’ll be people to fly from them,” Singel adds.

Opening new airports wherever feasible will also move some stress away from busier hubs. “The aviation ecosystem in India did not anticipate nor plan for such high growth. Most of the major airports are almost reaching saturation. New Delhi is a good example; capacity constraints in terms of terminals and ramp-side remain a major concern for airlines in India,” explains Abrol.

Another area that needs mention is the high fuel costs. “Over a year ago, ATF (Aviation Turbine Fuel) costed Rs 75 a litre. Though, today, it’s moderated to Rs 40, it is still quite highly priced,” informs Singel.

He goes on to add that airport costs must also be looked at. “At Airports Authority of India-owned (AAI) airports, rates are as low as 120th of that at private airports. For instance, a government airport will charge over Rs 7 per hour for parking a small (turboprop) plane, against a private airport’s fee of over Rs 250,” he says.

However, with a view to grow the sector, the National Civil Aviation Policy (NCAP 2016) has set forth many new ideas, foremost of all being to push regional flights. Also, progressive steps like the 0/20 rule replacing 5/20, is a great leap forward for more Indian carriers wanting to fly international.

So where does India stand in the sky? Experts say that the country has the potential to become a major transit hub for airlines, much like Singapore and Dubai.

Also, in the future, one may expect more people on a flight, along with more airports to take off from and land at, and obviously more planes, with Airbus forecasting a need for over 1,600 passenger aircraft in the next 20 years. So will one get to see an Airbus A380 or A350 in India soon? Answer is, ‘Sky’s the limit!’