Very tough path ahead for new entrants like Akasa, Jet 2.0: GMR official

Julian Carr, the firm's CMO, says it will be "fascinating" to see how IndiGo's desire to grow further progresses when Air India aims to become a big full-service domestic and international carrier

New entrants such as Akasa Air and Jet Airways 2.0 are moving forward in a "very tough environment", where even established airlines are struggling in certain areas, said Julian Carr, Chief Marketing Officer (Airlines and Route Development), GMR Airports Ltd, on Wednesday.

He added that it would be "fascinating" to see how IndiGo's aspiration to grow further progresses when Air India, under its new owners (Tata Group), is planning to be a big full-service carrier with a domestic as well as an international presence.

Last month, aviation consultancy firm CAPA had said Indian carriers are expected to post a cumulative loss of $2.5 billion in FY23 as airport charges, fuel, currency, labour and aircraft ownership costs are all rising.

GMR Airports operates major airports in Delhi, Hyderabad and Goa. During a session held by aviation analytics company OAG, Carr said: "There is still a huge appetite to start carriers. We have got a few. Akasa Air has just started, Jet Airways 2.0 hopefully starting soon and Flypop from the UK is yet to start its scheduled services but they are intending to."

"There are a variety of different carriers (which are starting up) and I am not going to criticise any particular model but is 'more' the principle?" he asked.

Akasa Air, a budget carrier, started operating commercial flights on August 7. Currently, the airline is operating about 400 flights per week. Jet Airways wanted to start flights by October under its new owners, by has not been able to do so amid a legal tussle with lenders over settlement of previous dues.

Carr said he was surprised to see so many companies still trying to start a new airline, each believing it has a unique proposition.

"I wish them all the best, I really do and I hope they all survive but it is a tough world. It is a very tough environment. The carriers who are already established with a big scale are already struggling in certain ways so I hope a lot of these (new entrants) will work but it is going to be difficult," he mentioned.

IndiGo is huge and it has an order book for hundreds of aircraft, he said. In that order book, there are A321XLRs as well, so the airline is getting into the long-haul market as well, he added.

IndiGo had in October 2019 placed an order for 300 A320neo family aircraft, which includes the new model A321XLR that is capable of operating long-haul flights. Airbus is expected to deliver its first A321XLR in 2024.

Carr said, "It (IndiGo) is very strict on its cost base and rapid turnaround at the airports. It is very rigorous in its approach. So, it ticks all the boxes and it has a good market share."

IndiGo also has a strong reputation. "IndiGo is very reliable. They are well-known for that. Yes, they are low-cost but they are very capable. Their aspiration is to continue growing. It is going to be fascinating to see how it all plays out with the new Air India," he noted.

The new Air India (under the Tata Group) is going to be this big full-service carrier with a mix of domestic and international flights, he said.

Then you have got IndiGo, which has a large share in the domestic market, now experimenting by leasing wide-body planes to fly non-stop flights to Istanbul, he added. Low-cost carriers across the world generally do not operate wide-body planes as their operating costs are higher than narrow-body planes. Full-service carriers are able to recover operating costs using wide-body planes as they have multiple class configurations (first class, business class, economy class, etc) with the front cabins having higher fares.

The Tata Group took control of loss-making and debt-ridden Air India on January 27 after successfully winning the bid for the airline on October 8 last year.

Air India is planning to place a huge aircraft order to boost its domestic and international flights. In the last few months, it has leased 36 aircraft to boost its flights.