US lets in price warrior Jet

The US Department of Transport's decision to allow in Jet Airways is expected to kick off a fare war on the India-US route.

"We are awaiting the formal approval and will then work on the schedule and fares. Our fares will be competitive," said a Jet Airways executive. An external affairs ministry official also confirmed that Jet Airways had been given the green signal.

Jet Airways has already placed orders for 10 Boeing 777s and seven A 330-200 aircraft and hopes to begin US operations by the summer of 2007.

"Of course they will play on price because they have to build market share and leverage on quality but we, too, are gearing up for battle," said an Air-India executive.

"Jet Airways will get more visibility but will face tough competition from domestic as well as overseas players," said Gautam Sinha Roy, analyst, Edelweiss Securities. The average economy class return fare to the US is around Rs 45,000.

India-US is among the most profitable sectors and is expected to help Jet Airways' troubled international operations, which account for about 17 per cent of the company's revenues but have been key to its losses, especially its operations to London.

"Jet Airways will have to compete with established carriers with deep pockets such as American Airways, Continental Airways, US Airways, British Airways and Lufthansa. Jet Airways will have to face competition from indirect flights, too, like Singapore Airlines," an aviation expert said. He added that Jet Airways might not get a passenger load factor of 70 per cent, essential to break even in the initial stages.

Another challenge for Jet Airways, experts said, would be to start multi-departure point operations in India to the US. This will require the carrier to acquire additional wide-bodied aircraft. International carriers are operating multi-departure points like Bangalore, Hyderabad and Chennai, apart from Delhi and Mumbai, to the US.

The traffic between India and the US is about 3 million passengers, growing by about 10 per cent a year. This is about 15.7 per cent of the total 19 million international passengers to and from India. But because of burgeoning demand, most airlines operate at over 80 per cent passenger load factor.

However, capacity to the US is expected to go up by 25 per cent in the next 12 months with new flights being added by many carriers.

Air-India, for instance, has increased its flights from 10 in 2002 to over 28, and with the new 777 Boeing aircraft joining the fleet next year, it is planning to launch non-stop flights.

By the end of 2007, it expects to have over 40 flights to the US.

Kingfisher Airlines is also planning to launch its services to New York by 2008 while Delta has started a non-stop daily flight from November. There are about 10 indirect and three direct passenger air services per day between the US and India.