 "Why airlines have done poorly on regional routes")
AirAsia Berhad of Malaysia, Asia’s largest budget carrier, started operations to India with a single flight to Trichy in 2008. Over the years, it has expanded its business to and from India gradually. Along with Thai AirAsia and AirAsia X, it today operates 94 flights a week on the circuit. It covers as many as nine Indian cities including Kochi, Vizag and Trichy.
Into Malaysia alone, the airline flies 70 flights a week from India. From Kochi, it operates three flights a day: twice to Kuala Lumpur and once to Bangkok. Similarly, from Chennai there are three flights a day: again, two to Kuala Lumpur and one to Bangkok. Most flights have a load factor of 70-80 per cent. Anything over 70 per cent ensures breakeven for the budget carrier.
In contrast, all the Indian carriers put together fly seven flights a week to Malaysia: 70 versus seven. Why have the domestic carriers failed to fly with any conviction on short-haul, but busy, international routes?
Many factors at play
Suresh Nair, a former Jet Airways executive who is now AirAsia Berhad general manager for India, Sri Lanka, Bangladesh and Maldives, says: “One will have to ask the Indian carriers this question.”
Barring a few flights to West Asia, including Dubai, most forays of Indian carriers into regional destinations have not worked in the past.
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GoAir CEO Wolfgang ProckSchaeur says that this is often the case when the domestic market is so large. “Growth in the Indian market is 15-20 per cent. So the domestic carriers have enough to keep them engaged.”
The argument is strong. Many of the smaller airlines that have captured the regional traffic from India, in fact, come from very small home markets and they have “no option” but to look outside for traffic. India doesn’t have the “advantage” of a small home market that will then push carriers to look overseas.
Industry experts, however, argue that many of the Indian players have been struggling even in the domestic market, let alone operate international operations efficiently. “They need to have their house in order at home before they can look beyond,” says a former secretary in the Union ministry of civil aviation.
According to him, most budget carriers have struggled at home. “If they take their eyes off the domestic market, they will have to pay a much higher price,” he adds, reeling off a list of routes they started and subsequently withdrew. The only player that has got its act together, IndiGo, is far too focused on the domestic market to go regional aggressively, many argue and rightly so.
Whenever, Indian carriers have flown on regional short-haul routes, either they have failed to estimate the market correctly or failed to compete with the more established players. Airlines like SpiceJet started flights to destinations like Guangzhou in South China and to Kabul but both were withdrawn subsequently. Experts say that the choice of routes has more often than not been quite “arbitrary”, reflecting lack of planning and failure to size up the market.
Discriminatory policies
Others say that the government is as much to blame as it has “hoarded” slots over the years supposedly with state-owned Air India’s interests at heart, though it has been generous in handing out bilateral rights to foreign carriers. Says IndiGo President Aditya Ghosh: “After giving foreign airlines a head start for 10 years, we now expect Indian carriers to magically compete on routes where all the prime time slots are already gone!”
But perhaps the biggest factor which impedes their regional plans is the fact that no Indian airline has a strong hub in India. Airports like Dubai, Singapore, Heathrow and Frankfurt have flights leaving every few seconds to take traffic onward to destinations all over the world. Faced with this, most airlines have tried to build routes based on point-to-point traffic which is hard to do and harder to sustain.
Says ProckSchaeur: “Despite the improvements in infrastructure, Indian airports have so far not been able to emerge as strong hubs for any airline.” This he feels is a serious issue that India will need to address at some stage.
Nair says that there are only a handful of routes where one can fill up the aircraft with just point-to-point traffic: Dubai, Singapore, Kuala Lumpur, Riyadh, Jeddah and Bangkok. “One needs either a very strong local market or a strong airline partner for onward connectivity.”
For AirAsia Berhad too, only 20 per cent of the total traffic from India is point-to-point: the rest 80 per cent flies to onward destinations like Australia, Japan and China.
The odds are therefore stacked against the Indian airlines. Competing even with the smaller international carriers is easier said than done.