Established Indian carriers like SpiceJet and Air India will now face tougher competition on both domestic and international routes. [Photo: Neelam Mathews]
May 13, 2014, 3:00 PM
Indian airlines are facing stiffer competition and downward pressure on air fares with 40 new aircraft due to join the country’s fleet, taking the total capacity to around 400 jets by year-end. Existing carriers are now facing new competition in the shape ofAirAsia India, which has just received its air operator permit (AOP) for domestic services. The new joint venture between Indian group Tata and Singapore Airlines (SIA) is hoping to get its AOP ready to start service to nine Indian cities with 87 flights from the capital Delhi in September as a prelude to planned international routes. Further competition is coming from the new A380 service into India by both SIA and Emirates Airlines.
The increased seat capacity and aggressive fare cutting by new market entrants like AirAsia India are posing a serious challenge to existing airlines with their short- to-medium range narrowbody fleets, even though these companies currently claim a 65-percent share of the domestic market. The lack of code-share alliances among Indian carriers is posing a further disadvantage on international routes. Dubai-based Emirates, for instance, operates 185 flights each week to Indian cities—representing 54,000 seats in total—and has plans to add 11,200 more. Dubai is the largest hub for Indians heading to Europe and the U.S. Etihad, which recently acquired a 24-percent stake in India’s Jet Airways, is aggressively diverting passengers to transit via Abu Dhabi to the Americas.
SIA, will likely code-share or sign an interline agreement with Tata-SIA that will take passengers to the West Coast of the U.S., as well as to various Southeast Asian countries and Australia. In anticipation of this move, India’s largest budget carrier, IndiGo, has withdrawn services connecting Delhi and Mumbai with Singapore.
With aviation fuel costs high and the Indian rupee not stabilized against the U.S. dollar, Indian carriers say they also suffer from not being treated fairly be the country’s regulator, the Directorate General of Civil Aviation. “DGCA has gone easy on the new carriers that are using India as a branch office and keeping economies of scale by centralizing operations in their home market,” said an executive with an Indian budget airline speaking to AINon condition of anonymity. He urged regulators to open up India’s skies to free competition and to stop efforts to impose what he characterized as archaic rules, such as not allowing flight cancellation charges. He also argued that new airlines are able to unfairly benefit from lower rates of interest on loans (4 percent versus around 13 percent).
But AirAsia founder Tony Fernandes countered in a tweet that the process of getting approval to start flying in India has been far from straightforward for the new competitors.