Starting Problems
Amidst turbulence in regional skies, a fifth player, Air Carnival, has entered the regional airspace and yet another full service commuter airline Zoom Air is all set to take off. There are lessons to be learnt from the regional airline hiccups.
EVEN WHILE THE GOVERNMENT is busy creating an ecosystem for regional connectivity, two of the four regional players are already floundering. Air Costa had suspended operations after issues with lessors, while Air Pegasus had lessors repossess their aircraft. Both the regional operators, however, got back on the runway, albeit for now. The government which is keen on boosting regional connectivity did offer to help the airlines, if they sought help. The Civil Aviation Minister, P. Ashok Gajapathi Raju, had stated that the government could do some ‘light handholding’. The case of Bengaluru-based Air Pegasus is quite serious as lessors had approached the Directorate General of Civil Aviation (DGCA) asking it to deregister the three planes it had loaned to Air Pegasus. The rules are a little complicated here and lessors are not too excited about it, though the Civil Aviation Secretary, R.N. Choubey has said that it was necessary to de-risk leasing as to attract more lessors to get into the market. While that would be good for the leasing community, the start-ups need to get their business model right as to not lose money and subsequently the aircraft.
AIR CARNIVAL STARTS OPERATIONS
Amidst all this turbulence, a fifth player, Air Carnival, entered the regional airspace on July 18 this year from Coimbatore, starting operations with one ATR aircraft. And another full service commuter airline Zoom Air has announced that it would be
soon flying on regional routes, deploying Bombardier’s CRJ. New start-ups entering the fray is welcome, but then the woes, financial mostly (besides safety as was noticed with Air Pegasus and which got pulled up by the DGCA, seem to loom large and there are lessons to be learnt from these players.
Deep pockets are just not enough for airline survivability, also of importance are the business model and operational capabilities. Airlines in India are failing on these counts as can be seen from what happened to Kingfisher Airlines, Air Deccan, Air Sahara, etc. In the last five years many proposals to start regional and full service airlines were granted, not all of them have taken off as they do not have the wherewithal.
FLYING ACROSS TAMIL NADU FOR NOW
It was in 2014 that got the approval from the Ministry but then tying up various ends took time for the airline. Promoted by S.I. Nathan, Founder and Director of Coimbatore Marine College (CMC) group, Air Carnival has had initial investment of ` 50 crore from the group. As of August 2016, it flies to three destinations (Chennai, Coimbatore and Madurai) using one ATR 72-500, making Chennai as its hub.
Air Carnival received its first aircraft, an ATR 72-500 in April 2016 and got its air operators certificate on July 4, 2016. Its first commercial flight was from Coimbatore to Chennai and the airline offered promotional tickets for one rupee. Presently, the airline operations are limited to Tamil Nadu, but it has plans to expand to other short-haul routes in adjacent states. On its performance in the first month, the airline executives were unavailable to comment, in a way indicating that it had nothing significant to talk about. The CEO Manish Kumar Singh had indicated to media that the airline had set a break-even target of two to five years and it remains to be seen how the fresher performs.
SMALL-TOWN CARRIER
Positioned as a small-town carrier, Air Carnival was to start with a fleet of two aircraft, but it started with one. It has stated that by the year-end it would add two more ATR 72-500 aircraft with full economy configuration and a seating capacity of 70. With short-haul flights, the airline hopes to rake in profits with 50 per cent occupancy, according to its CEO. How that is going to be viable remains to be seen. The good thing for the regional players is the regional connectivity scheme (RCS) which is going to be initial ‘handholding’ of the regional players.
The airline believes Coimbatore is strategically placed. The engineering centre as well as a textile hub is also emerging as an IT centre. Besides, its close proximity to two big metros—Chennai and Bengaluru— give it a locational advantage. The airline can expect to see more business travellers using flights between Coimbatore and other centres in the state and neighbouring states. Air Carnival has indicated that it will be soon starting flights from Chennai to Trichy and Chennai to Tuticorin, both in
SAFETY CONCERNS
Tamil Nadu, basically trying to cover the state of Tamil Nadu in all directions.
Presently, the profile of the three cities linked are Chennai, a major metro and a business centre; Coimbatore, textile and engineering hub; and Madurai a religious place and connecting point to Rameshwaram and Kanyakumari. The airline is targeting around 80-85 per cent load factor and target customers include first-time travellers, businessmen, people who travel on holiday and leisure and others.
BANKING ON ATR
The promoters are said to be infusing around $12 million to $15 million to take three aircraft on lease. The company has already invested $5 million. The airline has found the ATR ideal for its business model as the 70-seater aircraft are more economical for short haul services and they are proven one in India, dominating the regional market. The CEO has said that the airline was entering the fray at the right time with the government boosting regional connectivity, low fuel prices and positive passenger growth.
The mantra of the airline is ‘Safety First! On Time, Every Time.’ Safety is indeed an issue. Recently, Air Pegasus landed in trouble with the DGCA which had removed the flight safety chief and suspended five of its pilots for serious safety violations observed during its audit in April this year. The pilots have been suspended for a period varying from a week to a few months. The official said the mandatory Flight Operations Quality Assurance monitoring was not conducted properly by the airline’s flight safety chief. According to the norms, a scheduled airline has to monitor data for every flight, which has to be preserved for six months.
The DGCA observed that the pilots violated norms on multiple occasions as the flights which they operated had a high rate of descent than prescribed even when close to the ground. The pilots continued with the approach instead of doing a goaround. In one case, a flight landing in Thiruvananthapuram would have overshot the runway had the runway length not been close to 11,000 feet.
SOUTHERN REGION HOLDS PROMISE
Despite these financial and safety issues, the South continues to hold promise. Considering that the new airlines, both mainline and regional, have their base in the South (except Vistara which has its hub in Mumbai), the prospects of the South getting effectively networked by air has multiplied. AirAsia India has its hub in Chennai; Air Costa in Vijayawada; Air Pegasus in Bengaluru; and TruJet in Hyderabad. Another regional airline from Bengaluru— FlyEasy— is yet to take wings. Meanwhile, major logistics player VRL Group also has thrown its hat in the regional ring. There is going to be a lot of activity in the regional skies soon, but like what we have said: “They need to anticipate and negotiate the turbulence in the skies”.
CONSIDERING THAT THE NEW AIRLINES, BOTH MAINLINE AND REGIONAL, HAVE THEIR BASE IN THE SOUTH (EXCEPT VISTARA), THE PROSPECTS OF THE SOUTH GETTING EFFECTIVELY NETWORKED BY AIR HAS MULTIPLIED