Indian airlines look to cross China 'wall', but may land in soup over fares

After more than five years, Indian aviation companies are planning to launch flights to the Chinese mainland.

Low-cost airlines SpiceJet and IndiGo are eyeing to launch flights to Guangzhou and Kunming in China, according to travel industry sources. While SpiceJet is planning to operate three weekly flights between New Delhi and Guangzhou, IndiGo may fly to either Kunming or Guangzhou.

In 2017, 800,000 Indian tourists visited China.

During a recent industry event organised at Kunming, the largest city in Yunan province, representatives from both SpiceJet and IndiGo held discussions with the airport operators, it is learnt.

At present, Indian private airlines have no presence in the Chinese market with only state-owned Air India flying to Shanghai five times a week. Mumbai-based Jet Airways had started a flight between Mumbai and Shanghai, and onwards to San Francisco, in 2008, but it was suspended in 2009. For SpiceJet, this could be a return to China as it had pulled out its flights to Guangzhou during its financial crisis in 2014.

“We are very ambitious about the Chinese market. IndiGo is currently evaluating the feasibility of destinations with Kunming, one of the cities under consideration,” IndiGo’s Chief Commercial officer Willy Boulter has said. “SpiceJet will return very soon with flights between Delhi and Guangzhou with the Boeing 737 Max. The airline has obtained slots at Baiyun International Airport,” said a Spicejet executive.

Similar to the yawning trade deficit between India and China, the airline business between the two countries is dominated by Chinese airlines. Experts said there was opportunity in this space as Chinese carriers had limited growth prospects.

“Due to the air service agreement between the countries, Chinese airlines can’t increase the number of flights and Indian airlines are looking to expand their international market,’’ said Stone Luo, chief analyst at Shanghai-based aviation consultancy firm CADAS.

Besides the recent India-China aviation conference organised at Kunming, there have been many such interactions between the two sides, he pointed out.

Under the current bilateral air service agreement between the countries, airlines from both sides are allowed to operate 42 flights per week. Chinese airlines, with their aggressive growth, plan have already utilised their full quota with Air China, China Eastern, China Southern and Shandong Airlines operating flights to Delhi, Mumbai and Kolkata. India had in July rejected the Chinese government’s request to allow its carriers to add more flights due to opposition from Indian counterparts, a source said. With plans of flying to China, Indian airlines didn’t want further competition, the sources added.

“China is an all-season market due to the large presence of Indian traders in Guangzhou and Kunming. Also, a lot of Indian IT professionals are employed with Chinese companies. They will ideally like to travel with Indian airlines due to language and food preferences. There is an untapped potential there,” said an executive of an Indian airline.

The Union tourism ministry recently held road shows in Beijing, Shanghai and Wuhan to attract Chinese tourists. “We need to attract more Chinese tourists to India and we will take all steps to achieve that,” said Tourism Minister K J Alphons.

A lengthy period of frosty relationship between India and China had limited the scope of travel demand between the two countries despite being the fastest growing economies. That explains why despite housing almost 40 per cent of the world’s population, there are less than five flights per day between the two countries, an official said.

For Indian airlines, the economics of flying to China will also improve as they deploy the long-range narrow bodies. In fact, one of the reasons why SpiceJet pulled out of Guangzhou was it could not fly with full capacity. “The A321 Neo of IndiGo and 737 Max of SpiceJet will bring Chinese cities into the range, improving the cost of operations,” Luo said.

However, many argue that cracking the Chinese market will be a challenge for Indian airlines as Chinese airlines drop fares when faced with competition. “Chinese airlines are heavily subsidised by their government, allowing them to play the low fare game," said a Jet Airways executive. Local governments, especially those outside megacities like Beijing, Shanghai and Guangzhou, spent at least 8.6 billion yuan ($1.3 billion) subsidising airlines in 2016, mostly for them to start direct services to far-flung places such as New York and Paris.

"The best way to operate to China is by having a strong partnership with one of the local airlines,” according to an executive of Jet Airways which has a codeshare partnership with China Eastern."

What prompts Indian carriers to Chinese mainland

• Chinese airlines' inability to grow because of bilateral restriction
• Improved trade and travel relations between the countries
• Presence of fuel-efficient aircraft like A321neo and 737 Max in fleet