Indian airlines face stiffer competition and downward pressure on air fares as the country's fleet stands to absorb 40 new aircraft--taking the total capacity to around 400 jets--by year-end. Existing carriers also face new competition in the shape of AirAsia India, which has just received its air operator permit (AOP) for domestic services. The new joint venture between Indian group Tata and Singapore Airlines (SIA) hopes to get its AOP ready to start service to nine Indian cities with 87 flights from the capital Delhi in September as a prelude to planned international routes. Further competition promises to come from the new A380 service into India by both SIA and Emirates Airline.
The increased seat capacity and aggressive fare cutting by new market entrants like AirAsia India pose a serious challenge to existing airlines with their short- to-medium range narrowbody fleets, even though those companies currently claim a 65-percent share of the domestic market. The lack of code-share alliances among Indian carriers creates a further disadvantage on international routes. Dubai-based Emirates, for instance, operates 185 flights each week to Indian cities—representing 54,000 seats in total—and harbors plans to add 11,200 more. Dubai is the largest hub for Indians heading to Europe and the U.S. Etihad, which recently acquired a 24-percent stake in India’s Jet Airways, is aggressively diverting passengers to transit via Abu Dhabi to the Americas.
SIA will likely code-share or sign an interline agreement with Tata-SIA to take passengers to the West Coast of the U.S., as well as to various Southeast Asian countries and Australia. In anticipation of the move, India’s largest budget carrier, IndiGo, has withdrawn services connecting Delhi and Mumbai with Singapore.
With aviation fuel costs high and the Indian rupee not stabilized against the U.S. dollar, Indian carriers say they also suffer from unfair treatment by the country’s regulator, the Directorate General of Civil Aviation. “DGCA has gone easy on the new carriers that are using India as a branch office and keeping economies of scale by centralizing operations in their home market,” said an executive with an Indian budget airline speaking to AIN on condition of anonymity. He urged regulators to open India's skies to free competition and to stop efforts to impose what he characterized as archaic rules, such as not allowing flight cancellation charges. He also argued that new airlines unfairly benefit from lower rates of interest on loans (4 percent versus around 13 percent).
