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Air India is the state-owned national carrier of India with its main hubs at Delhi and Mumbai airports. It established an international LCC subsidiary, Air India Express, in 2005 and merged with Indian Airlines in Aug-2007. Its network covers domestic and regional destinations, as well as international services to Asia, the Middle East, Europe, and North America.
Location of Air India main hub (Delhi Indira Gandhi International Airport)
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This is the second in a four-part series of extracts from the 200+ page annual India Aviation Outlook Report 2013/14. The first extract looked at the changing dynamics of the airline sector on both domestic and international routes.
This second part looks at the policy vacuum that persists in India and the harmful impact of this neglect on the viability and development of the sector.
The third part will address key issues in airport and airspace infrastructure while the final extract will consider this year’s outlook for traffic, capacity, yields and airline profitability.
The Singapore-India market is poised for a modest increase in capacity, driven by further expansion from the Singapore Airlines (SIA) Group made possible by the recent signing of an expanded bilateral between the two countries.
The updated air services agreement only increases the previous capacity allotment for Singapore-based carriers by 10%. But SIA will take whatever it can get as Singapore-India is an important and generally under-served market. Incremental increases are typical with the India-Singapore bilateral, which has been updated several times in recent years, although Singapore would prefer a much bigger and broader agreement.
SIA along with full-service subsidiary SilkAir and low-cost carrier affiliate Tiger Airways already account for over 70% of capacity between India and Singapore. Indian carriers do not require a revised bilateral as they were using less than 40% of the prior allotment. Indian carriers over the last year have seen their share of the market decrease and may see their share drop further by the end of 2013 as the SIA Group again boosts capacity to India.
In this second extract from the CAPA India Aviation Outlook 2013/14 we look at the growing challenges to flag carrier Air India’s business model.
A combination of stronger Indian competitors as a result of foreign airline investment, the growth of LCCs, the opening up of the international market in the form of bilateral liberalisation and the changing nature of global alliances, will impact each of the three key areas of Air India’s operations – long-haul international, regional international and domestic – each of which we will consider in turn below.
Air India has delivered a significant improvement in its operational and financial performance in FY2013, partly due to improved market dynamics following Kingfisher’s exit, but also as a result of a serious and committed approach by the management of Air India, new marketing initiatives and measures adopted to rationalise its network.
But India's ageing flag carrier is still soaking up over a billion dollars of India's precious budget each year – with no prospect of a serious turnaround for the airline in its present form.
The easiest path for India's leaders to take is to avoid facing the problem and to keep applying a hundred million dollars of taxpayers money each month to apply bandaids to the ailing airline.
Jet Airways is expected to be the first incumbent airline to take advantage of the Sep-2012 decision by the Indian Cabinet to permit up to 49% foreign investment in Indian airlines.
Allowing foreign airline investment is a vital step in establishing a more professional and corporatised sector in India. It offers the promise not only of introducing strategic capital and expertise into the market, but also delivers a much needed confidence factor for other institutional funding.
However, a big drawback remains the weakness of India’s underlying regulatory framework and the structural challenges in Indian aviation. Until a host of typically Indian nit-picking bureaucratic and political issues are squared away, it remains a lottery investing into the country. That is a fundamental issue for any government serious about encouraging measures to generate consumer (and corporate) benefits.
With Japan's two leading airlines – All Nippon Airways and Japan Airlines – having about half of the world's 787 deliveries and being based in Tokyo, Japan's capital has become the most affected city by the grounding of the Boeing 787 Dreamliner. ANA and JAL operate out of Tokyo Haneda and Tokyo Narita, and it is Haneda airport alone that has seen the widest impact as there are 229 weekly 787 frequencies, more than four times the next largest 787 airport, Delhi. Tokyo Narita sees the third most number of 787 services with 35 weekly flights.
Yet Japan's carriers, and ANA especially, should be best equipped to mitigate the grounding. Schedules have slack and system load factors are low, at around 60-70%.
A political dispute between China and Japan has seen capacity on bilateral routes fall by over 20%, giving further wiggle room in schedules. One saving grace of this incident, provided it is resolved soon, is that this is the low season for travel. That is not to say airlines will not face challenges – or find the situation acceptable. But, for airports, there is an unavoidable loss of revenues, as these airlines reduce their 787 services.
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