took over as the chairman and managing director of Air-India in December last year. Since then he has had an eventful time with the Maharaja. The national carrier has formalised a Rs 10,000-crore fleet acquisition plan and has charted out a strategy for starting a low-cost carrier. Now, the airline is embarking on a second round of fleet acquisition to beef up its existing services as well as to start services to new sectors. Thulasidas spoke to Business Standard about Air-India's plans and how it intends to take on competition from other international carriers.
Excerpts:
The past six months have seen Air-India taking several major decisions such as fleet acquisition, launching a low-cost carrier and charting plans to hive-off various ancillary businesses as separate business units. What is the strategy behind this?
Air-India is a public-sector undertaking with an aim to be profitable. The initiatives taken in the past few months are a part of this strategy. Besides, we have to meet the demands of our customers as well. We need additional aircraft in our fleet to meet the emerging demand. We also need to modernise and rationalise the fleet, which will help us run services more economically.
For instance, we need to connect the smaller Indian cities to the rest of the world. There is no point in operating larger aircraft from these cities because they require aircraft with low seating capacities.
One of the major problems that Air-India faces is its high-cost structure. Besides, the company also has a large employee base that gives it a higher aircraft-manpower ratio compared to the industry average. How do you plan to rationalise your costs in such a scenario?
It is true that we operate in a very high cost environment. At Air-India, whatever we do is expensive. We have to bring down the cost structure to be efficient. But at the same time, we are not looking at boosting our bottomline by cutting investment in key areas.
What we require is rationalisation of expenditure and efficient cost management. We have to look at higher productivity from our employees as well as better utilisation of aircraft. Each route of Air-India has become more efficient and profitable. Now we have to manage our inventory better, cut aircraft down-time, reduce the stock of spares and concentrate on our core strengths.
When it comes to manpower, what we require is manpower rationalisation that could be undertaken in an effective manner.
Air-India seems to be the biggest obstacle when it comes to the government's open-sky policy.
We are not against the open-sky policy. We have been operating in a competitive environment all along. Look at all the sectors in which we operate. We face stiff competition from major airlines in the world.
We have a strong brand value amongst Indian travellers. If we cannot face competition, we have no business to be in the aviation business. The open sky policy will bring more competition and will expand the market. It will also help us improve our performance.
Air-India's fleet acquisition plans have not gone forward. How do you plan to tackle the issue?
We are yet to hear from the government on the issue. The government knows that Air-India needs additional fleet to remain competitive. We depend on the leasing option to meet the immediate requirements.
At the same time, we are also looking at a second fleet acquisition plan for long- and mid-range aircraft and have constituted an internal committee to look into the matter. It is studying the market for such aircraft and services. Once the complete fleet acquisition is concluded, we will have a fleet of about 60 to 70 aircraft.
Is funding the major obstacle for fleet acquisition?
Funding is not a concern for us. It will be easy for us to raise loans in the international market and we will not require government funding. Once we get the required approvals for fleet acquisition, we will start the process of raising funds.
Many international airlines are starting non-stop services to the US and Europe. What are your plans in this regard?
Non-stop flights to the US and Europe are a different market. They have opened up a new segment of travel just like the Concorde service did. The non-stop services are smaller aircraft services with long flying hours and fewer seats. Such a service will attract a higher tariff structure. We, too, are looking at this market and will start a service in this category in the future.
International airlines are not only increasing their frequency from India in the existing sectors but are also adding new sectors. Have you lost traffic as a result of this?
We see major demand from India for some key sectors. For instance, in the US, we have New York, Newark and Chicago, and will be starting services to Los Angeles soon. We are also looking at starting services in San Francisco, Washington, Houston and Dallas. Similarly, we will need a service to Toronto via Europe.
In western Europe, we fly to London, Paris and Frankfurt. We have recently started terminator services to London from Ahmedabad. There's also a demand for service from major European cities.
Similarly, in west Asia, we cover most of the major sectors but need to provide more convenient connectivity. In south and east Asia, there is a demand for new services. At present, we fly to Shanghai and Beijing, but we have permission to start more services, which we will soon.
China is a major market for us. The constraint for us is that there was no scope for additional flights in the existing bilateral agreement. Similarly, we see demand from Hong Kong, Tokyo and Osaka. We are also keen to start a service to Australia. We also see demand from cities like Bangalore, Chennai and Hyderabad for better connectivity.
What is the strategy for the US market, since most airlines are targeting this sector from India?
We have dry-leased aircraft to increase the frequency to many existing destinations and introduce new flights. This includes introduction of a daily service on the India-Paris-Newark sector and three flights to Chicago via Frankfurt. Air-India is further proposing to take two more Boeing 747-400 on dry lease by October 2004.
These aircraft are being dry-leased for starting flights to Los Angeles. Initially, the flights will be started on a thrice-weekly basis and the frequency will be increased to five flights a week by October.
Since December 2002, Air-India has doubled its capacity in the India-US sector from 10 to 20 flights a week. Introduction of flights to Los Angeles will increase our services to the US to 25 a week in October.
What is the strategy behind Air-India Express, the low-cost carrier?
There is a demand for such a service the world over. From India, there's a need for a low-cost carrier to certain sectors like west and South-east Asia, which are markets with a huge Indian population. A low-cost, no-frill airline is the best solution. We will be operating from multiple centres in India to these destinations.
While Air-India Express will cover most of west and South-east Asia, Air-India will operate only in certain sectors in this region. We plan to start the low-cost service in summer next year.
