Airlines India, Indian Airlines

After the proposed merger of the Indian Airlines with Air India, the cargo arm of Indian Airlines will be hived off to operate as separate entity. The proposed cargo operations will be handled as a division of Indian Airlines till the process of merger is completed. The airline has already taken approval from the Government of India for its cargo operations. India has a huge market for cargo carriers and is growing at a rate of 20 percent per year. Jet Airways and Kingfisher Airlines are also planning to start their cargo operations. with the booming retail sector, the cargo business is expected to grow at a higher pace as the retail companies would use air cargo services to ship their goods to various destinations across the country.

Under the process the airline is planning to convert some of its existing passenger carriers into freighters. To start with, the airline will convert its five Boeing 737 aircrafts into cargo carriers. Some non airline companies are also showing their interests in air cargo business, therefore, the airline companies are making their first moves to encash the upcoming opportunity.

The Indian civil aviation industry, which is forecast to log robust double-digit growth for the next five years, has emerged as a hotspot for global players - thanks to the entry of a host of low-cost carriers, mega mergers, orders for over 400 new aircraft by airlines and grand airport modernisation plans.

From global aircraft manufacturers to airport managements, and training academies to in-flight entertainment companies, there has been a beeline to grab a share of the opportunities that are being thrown by the exploding Indian skies.

“Two years ago it was impossible to even conceive that India could be such a big player in the aviation market,” said Kapil Kaul, the India head of the Centre for Asia Pacific Aviation, a leading think tank for the industry.

“But over a span of one year, lots of baggage has been unlocked in India and the civil aviation industry is booming. Come to think of it, Indian carriers placed orders for over 400 aircraft worth a whopping $30bn,” Kaul said.

During a visit to Paris and Toulouse recently, a media team from India found the insignia of Indian carriers - like Kingfisher and Air Deccan - on the tails of most aircraft being assembled at the facilities of Airbus, Dassault and ATR.

It wasn’t surprising since statistics compiled by Airbus Industrie showed that Indian carriers accounted for 327 out of the 2,140 firm orders for new aircraft that were placed with it and rival Boeing in 2005.

This does not take into account the orders placed for smaller airplanes with other manufacturers like ATR and Dassault - which, too, are flooded with offers from private Indian carriers.

India, in fact, has been the flavour at virtually every air show since 2005.

“Given the projected growth of the Indian economy and its aviation industry, we foresee that the demand for air travel in 2025 will be met by 959 aircraft,” said Colin Stuart, vice president, marketing, Airbus Industrie.

“Of these, 935 aircraft will be new acquisitions valued at $93bn,” Stuart told IANS in Toulouse, adding that factors that would push growth include strong pent-up demand, progressive market liberalisation and growing household income.

Indian corporate houses - like Reliance Industries, Videocon, Raymond, and Jaiprakash Associates - are buying private jets like ATRs, Falcons, Cessnas, Bombardiers, Beech Kings and Gulfstreams in large numbers.

“We see a potential to sell 30-40 of our Falcon aircraft in India over the next eight years,” said Thierry de Poncins, director for Falcon’s international sales at French aircraft manufacturer Dassault.

In the last fiscal, the Indian aviation industry logged a robust growth of 24% and experts say the sector will expand by at least 16% annually for the next five years, riding on the overall economic growth of eight%.

Passenger traffic grew to 52.12mn in the last fiscal, from 43.47mn in 2004-05, to register a growth of 19.9%.

To catalyse the growth process, the government is also working on a new civil aviation policy. “The new policy will address all issues that will benefit the aviation sector in the long run,” said Indian Civil Aviation Minister Praful Patel.

“We will actively operationalise 400 airports with scheduled flights, connecting every corner of the country. The idea is to push regional connectivity with sops and incentives to encourage operators,” Patel added.

But experts also warned of poor infrastructure - especially at airports. “We all know India’s air transport infrastructure is out-of-date. In fact, the overall situation is critical,” said Giovanni Bisignani, chief of the International Air Transport Association (IATA).

It is for this reason that the government also took some unprecedented decisions in recent months to build airport infrastructure. Private consortiums were given mandates to upgrade two existing airports and build two new ones.

The airports at Delhi and Mumbai will be modernised at a cost of $1.2bn, two Greenfield airports will come up in Hyderabad and Bangalore and plans are being drawn up to develop a series of secondary airports by 2008-09.

“Thirty-five non-metro airports are being developed as virtual gateways for our passengers. The funds required for the modernisation of the secondary airports is huge and the private sector is being roped in,” Patel said.

Experts maintain the resurgence of the Indian air travel industry has been the result of some active liberalisation by the government to permit the entry of low cost carriers, who, in turn, pushed price-based competition to new levels.

“The expansion of air transport in India is among the fastest in the world,” said IATA chief Bisignani, adding, “The airlines are moving fast. Government policy is moving in the right direction. But infrastructure must catch up.”

Centre for Asia Pacific Aviation predicts the LCC market share in India will reach 70% by 2010, making it one of the world’s leading LCC markets in terms of total market penetration. Given the growth potential of the market and penetration levels already achieved by LCCs, the Centre predicts that within the next five years, India could see the establishment of a home-grown LCC with the size and scale approaching that of easyJet or Ryanair today.

The prediction comes as the Centre prepares to hold its third annual India and Middle East LCC Symposium in Mumbai on 29/30 September 2006.

“The launch of IndiGo in the past few days will keep the market growing strongly in the months ahead”, stated the Centre’s CEO Indian Subcontinent & Middle East, Kapil Kaul.

“Full service carriers are, on average, bleeding a remarkable 1.5 percentage points of market share every month to LCCs. We do not expect this rate to slow in the short term, given the profile of current fleet orders. LCCs could therefore control over 35% of the domestic market by the end of 2006 and pass 50% some time in 2H07. The Indian domestic market has been growing at almost 50% so far this year. The emerging untapped leisure/VFR sector will drive the domestic market to more than double over the next five years (growing at 25% annually) to around 60 million passengers by 2010 – and LCCs will gobble up most of the new traffic growth”, said Mr Kaul.

“But high fuel costs, low yields and congested airport infrastructure pose major risks to the sector going forward and have the potential to place a major strain on airline finances. While we are not predicting a bloodbath, airlines will need to be careful with capacity and ensure they are well funded”, concluded Mr Kaul.

The Symposium will cover issues including international and domestic market prospects, as well as the potential viability of long-haul low cost models serving the Indian Subcontinent region.

Deutsche Lufthansa AG said it will not launch a share buyback programme in order to prevent foreign investors from holding more than 50 pct of the German flag carrier.

At present, foreign shareholders hold 40.29 pct of Lufthansa.

Should the percentage of Lufthansa shares held by foreigners exceed 50 pct, European law states the carrier will lose air traffic rights to fly to international destinations outside the continent.

However, after a careful analysis of share trading, Lufthansa ‘does not currently see a threat of excessive foreign control,’ and it ‘continues to place its confidence in the self-regulation of the capital market.’

Therefore, Lufthansa said it will not make use of a clause in the German Aviation Compliance Documentation Act authorising it to launch a share buyback programme in order to prevent ‘imminent excessive foreign control.’

Papua New Guinea’s privately-owned airline, Airlines PNG, is extending its wings further with a new service to Brisbane from Port Moresby commencing this month.

Announcing the new service last month, Airlines PNG is now advertising its twice-a-week service between the Australian city and the PNG capital which will begin operation on August 21.

After years of servicing PNG’s domestic routes and a successful charter business catering particularly for the country’s thriving mining industry, Airlines PNG now wants to complement its equally successful Port Moresby-Cairns service with flights to the Queensland state capital.

Explains Simon Wild, managing director of Airlines PNG: “What is unique about our Brisbane services is that the Boeing aircraft we will be using will feature an all-business class seating configuration, with only 60 very roomy and comfortable seats in the cabin.

“But we will be selling those seats at discounted economy class prices and yet still provide a free meal and bar service.”

Previously known as Milne Bay Airlines or MBA, Airlines PNG was formed nearly 20 years ago by Wild’s father, John, a naturalised citizen of PNG. The company operates a fleet of de Havilland Dash 8 and Twin Otter aircraft.

The airline has the largest fleet of Dash 8 in the Pacific, one of which is leased to Samoa’s domestic carrier, Polynesian Airlines.

That lease was negotiated when John Fitzgerald, now general manager of Airlines PNG, was head of the Apia carrier.

But following the scaling down of Polynesian after its international service was taken over by Virgin Blue and known as Polynesian Blue, Fitzgerald resigned to join Airlines PNG as general manager.

“Airline PNG’s Port Moresby-Cairns service that commenced late 2005 has been successful in stimulating the PNG-Australia market. It has proven that there is room for competition on routes between the two countries,” Fitzgerald said.

“We will initially be providing Brisbane services Monday and Wednesday each week. But we will look at expanding those services when market forces dictate.”

A large part of the market share is currently held by PNG’s national carrier, Air Niugini, which operates daily flights between Port Moresby and Brisbane.