India’s Air Costa Aims To Go International

AINonline
Air Costa Embraer E170
Now leasing a pair of Embraer E170s, Air Costa became Embraer’s largest-ever Indian customer in February, when it placed an order for 50 of the company’s planned E2s. (Photo: Air Costa)
March 24, 2014, 3:15 PM

Five-month-old Indian regional airline Air Costa plans to start international operations once India lifts its rule that limits new carriers to domestic services during their first five years of operation. Ahead of that revision, the carrier, which ordered a mix of 50 Embraer E190-E2s and E195-E2s at the Singapore Air Show in February, has applied for a national permit to fly pan-India, Vivek Choudhary, chief commercial officer and vice president of corporate finance of parent company LEPL Projects Ltd., told AIN. He noted that the range of the E2s would allow the carrier to fly to neighboring Southeast Asia and Middle East countries. “We will also look at code shares with [international] carriers in future,” he added.

Scheduled for first deliveries in 2018, Air Costa’s E190-E2s will arrive configured with six business and 92 economy seats.  The larger E195-E2s will carry 12 business and 106 economy seats.

With the state of Andhra Pradesh recently split into two and given the location of Air Costa’s base in Vijayawada, the intended new capital of the new state of Seemandhra, the airline appears bound to benefit from new infrastructure and increased traffic flow. “The decision to base ourselves here is a conscious one, as we get a first movers’ advantage through benefits from the state government on fuel and parking,” said Choudhary. “In another three years, Vijayawada will be an international airport.” The airline plans then to tap 30 percent of the international traffic into Hyderabad (which will then become capital of the split state called Telengana), largely comprising Indian expats heading to Vijayawada.

Air Costa has already registered 75-percent load factors as it concentrates on connecting second- and third-tier cities. Its fleet consists of two dual-class E170s on a 10-year lease and plans call for another two all-economy E190s to arrive early next month.

“By the end of the year we will have six aircraft, with four more arriving every quarter until 2018,” said Choudhary.

According to India’s regional aviation policy, carriers operating airplanes lighter than 40 tons and with fewer than 80 seats incur no route navigation facility charges and only a 4-percent fuel tax, compared with the average of 35 percent. However, the policy prohibits regionals from flying to large cities outside the southern region. “The policy is not clearly defined…We can take off from three southern metros—Chennai, Hyderabad and Bangalore—to any small city outside the region but have to return to the South [before connecting to another city outside the region], making it restrictive,” said Choudhary. The airline is in discussions with the ministry of civil aviation to extend the regional policy rule to 120-seaters because “most markets in the region require 100 to 120 seats,” he added. “So we would need bigger aircraft.”

Air Costa’s move to buy 50 E2s might have raised eyebrows among those unconvinced of the prospects for regional jets in India following the failure of former Indian E-Jet operator Paramount Airlines. Choudhary dismisses any comparisons with Paramount, however: “In spite of Paramount and [the bankruptcy of] Kingfisher, aircraft were leased to us,” he said. “This basically endorses our business plan and strategy.”

Embraer vice president for the Asia-Pacific region Mark Dunnachie added that, even in India, passengers will pay a premium to fly in a jet rather than a turboprop. “We’re believers in right-sizing,” he said. “A passenger is willing to pay five to ten dollars extra for comfort.”

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