Aviation battle breaks out in Bangalore

After AirAsia India decided to make Bangalore its hub, rivals like IndiGo and Jet Airways have rapidly scaled up connectivity to the city

The newest battleground for India's airlines is Bangalore, not Delhi or Mumbai. The country's two busiest airports, which constitute over 35 per cent of all domestic traffic, hardly have any capacity left which is used by low-cost carriers. That's why low-cost carriers are making a beeline to the city often described as India's Silicon Valley. Since there is little differentiation in the market now, the full-service carriers are set to follow them.

It all started when AirAsia India, the most serious challenger for market leader IndiGo, decided to make Bangalore its hub of operations in the country. In addition, Bangalore in October last year became the hub for Air Costa, a regional airline that connects Bangalore, Chennai and Hyderabad to Vijayawada, and also flies to Jaipur and Ahmedabad in the north. Bangalore's growing importance is evident in the numbers: from June to the end of the year, as many as 64 more flights will connect the city to existing as well as new destinations. The airlines that plan to mount these additional flights include IndiGo and Jet Airways apart from AirAsia and Air Costa. Bengaluru International Airport Ltd (BIAL) claims the airport witnessed 12 per cent growth in traffic between January and May this year, the latest period for which the figures are available, compared to the same period last year. Overall air traffic in the country during the five months grew by 4-5 per cent.

Mittu Chandilya, the CEO of AirAsia India, says the decision to locate the airline's hub in Bangalore instead of Delhi or Mumbai was driven by the latent potential in the city. "It will take some time and effort to develop that potential but we will do so," says he. "We were the first to realise the potential of Bangalore and other cities around it. It's a natural network evolution process due to the saturation at key metros."

AirAsia has ambitious plans for Bangalore: it is going to station six out of its eight aircraft in the night in the city and expects to fly as many as 40 flights to and from Bangalore by the end of December. It wants to connect Bangalore to several small cities across the country, especially those in Madhya Pradesh. Not to be left behind, Air Costa, which already connects Bangalore to eight destinations in the South, plans to add Patna, Raipur and Jodhpur to the network.

Readying for the fight
This has turned Bangalore into a virtual battleground. IndiGo is upping the ante and plans to introduce five new flights from the city by October. It will not let AirAsia, the new kid on the block, wrest market share away from it without a fight. It is introducing a flight from Bangalore to the uncharted market of Chandigarh, where AirAsia also wants to fly. Currently, there is no direct flight from Bangalore to the city. Fliers between the two cities first need to go to Mumbai or Delhi and then take the connecting flight. A direct flight will save them time and also avoid them the hassle of boarding a second flight.

IndiGo has also cleverly increased capacity on routes that currently are AirAsia's bread-and-butter business: Bangalore-Kochi (from one flight to three a day) and Bangalore-Goa (from one flight to two a day). Kochi is the gateway into Kerala and a market where AirAsia has some brand equity because of its international flights. That's not all. In anticipation of AirAsia's entry into the east, IndiGo is adding another daily flight on the Bangalore-Kolkata sector. These initiatives, says an executive of a competing airline, will help IndiGo amortise its fixed costs over larger number of flights.

Even Jet Airways is stepping up its game. It is adding two daily flights each on the Bangalore-Kochi and Bangalore-Chennai routes and is flying a bigger Boeing 737 aircraft instead of 62-68-seat turboprop ATR on the Bangalore-Goa route. These are again markets where AirAsia and IndiGo too are making their presence felt.

Of course, the key reason for Bangalore's new-found attractiveness is the fact that additional capacity for low-cost carriers is simply not available at the terminals from where they operate in Delhi and Mumbai. "In Delhi, there is no capacity available in the 1D terminal which is the low-cost airport. You have to go to the T-3 terminal. But you cannot have low-cost operations from two terminals as that adds to cost. So you have to look elsewhere," says a senior executive of a low-cost carrier.

Therefore, airlines have to look at other routes, especially as they take delivery of new planes in the days to come. And Bangalore with its large IT population makes for an attractive destination when compared to Chennai or Hyderabad. In 2013-14, Bangalore had grabbed over 8.3 per cent of the country's domestic passenger traffic, which is much more than that of Hyderabad (5.3 per cent). Also, Hyderabad has already used up three-fourths of its total passenger handling capacity of 12 million. Bangalore airport has also wrested the number three slot from Chennai - it flew over 10 million domestic passengers in 2013-14 compared to Chennai's 8.3 million. Aviation industry executives say that Chennai also has huge potential for growth but the lack of critical infrastructure like parking lots has led many to look for business elsewhere in the south. The Bangalore airport scores because it has a lot of capacity to grow: it carried around 12.9 million passengers (domestic and international) last financial year, while it has the capacity to handle over 20 million passengers.

Reaching out to the other India
The Bangalore airport also has been aggressively marketing itself and pushing airlines to launch flights on new regional routes with potential for air travel. "We have been working with domestic carriers like SpiceJet, Jet Airways and Air Costa on regional connectivity, which has shown tremendous growth in Bangalore," says a BIAL spokesperson. The airport, for instance, has identified nascent destinations like Srinagar, Tuticorin, Rajahmundry, Pondicherry, Tiruchirappalli, Tirupati, Ranchi, Madurai, Port Blair, Jammu and Udaipur for connectivity. "We see huge potential for these markets and aim to tap the potential of these cities with our airline partners," the spokesperson adds.

Not only is competition turning fierce, but Bangalore is also doling out special incentives to woo airlines. For instance, it declared that it will offer 40 cent discount on landing and parking charges to all airlines headquartered in the city that keep most of their aircraft at the airport. But the "home carrier" policy has been opposed by competing airlines at the Airport Economic Regulatory Authority Appellate Tribunal which has stayed the proposal. Competing airlines say that this would benefit only AirAsia and Air Costa and would be detrimental to the interests of the existing carriers as they cannot suddenly shift their aircraft from other stations to meet the rules.

The future certainly looks good for Bangalore. South India is still an underserved market, which means there is a lot of room for growth in the region. Chandilya, one of the chief proponents of this view, says: "The southern market is not as connected as the North or the West. However, I do believe the latent potential here is stronger both domestically and internationally." As Bangalore prepares to become the next hotspot in the aviation sector, one segment that stands to benefit the most is the flyers.