In­dian air­lines look to cross the China wall

Business Standard - - FRONT PAGE - ARINDAM MA­JUMDER

Af­ter more than a decade, In­dian avi­a­tion com­pa­nies are plan­ning to launch flights to the Chi­nese main­land.

Low-cost air­lines SpiceJet and IndiGo are eye­ing to launch flights to Guangzhou and Kun­ming in China, ac­cord­ing to travel in­dus­try sources. While SpiceJet is plan­ning to op­er­ate three weekly flights be­tween New Delhi and Guangzhou, IndiGo may fly to ei­ther Kun­ming or Guangzhou.

In 2017, 800,000 In­dian tourists vis­ited China. Dur­ing a re­cent in­dus­try event or­gan­ised at Kun­ming, the largest city in Yu­nan prov­ince, rep­re­sen­ta­tives from both SpiceJet and IndiGo held dis­cus­sions with the air­port op­er­a­tors, it is learnt.

At present, In­dian pri­vate air­lines have no pres­ence in the Chi­nese mar­ket with only state-owned Air In­dia fly­ing to Shang­hai five times a week. Mum­bai-based Jet Air­ways had started a flight be­tween Mum­bai and Shang­hai, and on­wards to San Fran­cisco, in 2008, but it was sus­pended in 2009. For SpiceJet, this could be a re­turn to China as it had pulled out its flights to Guangzhou dur­ing its fi­nan­cial cri­sis in 2014.

“We are very am­bi­tious about the Chi­nese mar­ket. IndiGo is cur­rently eval­u­at­ing the fea­si­bil­ity of des­ti­na­tions with Kun­ming, one of the ci­ties un­der con­sid­er­a­tion,” IndiGo’s Chief Com­mer­cial of­fi­cer Willy Boul­ter has said. “SpiceJet will re­turn very soon with flights be­tween Delhi and Guangzhou with the Boe­ing 737 Max. The air­line has ob­tained slots at Baiyun In­ter­na­tional Air­port,” said a Spicejet ex­ec­u­tive.

Sim­i­lar to the yawn­ing trade deficit be­tween In­dia and China, the air­line busi­ness be­tween the two coun­tries is dom­i­nated by Chi­nese air­lines. Ex­perts said there was op­por­tu­nity in this space as Chi­nese car­ri­ers had lim­ited growth prospects.

“Due to the air ser­vice agree­ment be­tween the coun­tries, Chi­nese air­lines can’t in­crease the num­ber of flights and In­dian air­lines are look­ing to ex­pand their in­ter­na­tional mar­ket,’’ said Stone Luo, chief an­a­lyst at Shang­hai-based avi­a­tion con­sul­tancy firm CADAS.

Chi­nese air­lines have al­ready utilised their full quota with Air China, China Eastern, China South­ern and Shan­dong Air­lines op­er­at­ing flights to Delhi, Mum­bai and Kolkata Be­sides the re­cent In­dia-China avi­a­tion con­fer­ence or­gan­ised at Kun­ming, there have been many such in­ter­ac­tions be­tween the two sides, he pointed out.

Un­der the cur­rent bi­lat­eral air ser­vice agree­ment be­tween the coun­tries, air­lines from both sides are al­lowed to op­er­ate 42 flights per week. Chi­nese air­lines, with their ag­gres­sive growth, plan have al­ready utilised their full quota with Air China, China Eastern, China South­ern and Shan­dong Air­lines op­er­at­ing flights to Delhi, Mum­bai and Kolkata. In­dia had in July re­jected the Chi­nese gov­ern­ment’s re­quest to al­low its car­ri­ers to add more flights due to op­po­si­tion from In­dian coun­ter­parts, a source said. With plans of fly­ing to China, In­dian air­lines didn’t want fur­ther com­pe­ti­tion, the sources added.

“China is an all sea­son mar­ket due to the large pres­ence of In­dian traders in Guangzhou and Kun­ming. Also, a lot of In­dian IT pro­fes­sion­als are em­ployed with Chi­nese com­pa­nies. They will ideally like to travel with In­dian air­lines due to lan­guage and food pref­er­ences. There is an un­tapped po­ten­tial there,” said an ex­ec­u­tive of an In­dian air­line.

The Union tourism min­istry re­cently held road shows in Bei­jing, Shang­hai and Wuhan to at­tract Chi­nese tourists. “We need to at­tract more Chi­nese tourists to In­dia and we will take all steps to achieve that,” said Tourism Min­is­ter K J Alphons.

A lengthy pe­riod of frosty re­la­tion­ship be­tween In­dia and China had lim­ited the scope of travel de­mand be­tween the two coun­tries de­spite be­ing the fastest grow­ing economies. That ex­plains why de­spite hous­ing al­most 40 per cent of the world’s pop­u­la­tion, there are less than five flights per day be­tween the two coun­tries, an of­fi­cial said.

For In­dian air­lines, the eco­nom­ics of fly­ing to China will also im­prove as they de­ploy the long range nar­row bod­ies. In fact, one of the rea­sons why SpiceJet pulled out of Guangzhou was it could not fly with full ca­pac­ity. “The A321 Neo of IndiGo and 737 Max of SpiceJet will bring Chi­nese ci­ties into the range, im­prov­ing cost of op­er­a­tions,” Luo said.

How­ever, many ar­gue that crack­ing the Chi­nese mar­ket will be a chal­lenge for In­dian air­lines as Chi­nese air­lines drop fares when faced with com­pe­ti­tion. “Chi­nese air­lines are heav­ily sub­sidised by their gov­ern­ment, al­low­ing them to play the low fare game," said a Jet Air­ways ex­ec­u­tive. Lo­cal gov­ern­ments, es­pe­cially those out­side mega ci­ties like Bei­jing, Shang­hai and Guangzhou, spent at least 8.6 bil­lion yuan ($1.3 bil­lion) sub­si­dis­ing air­lines in 2016, mostly for them to start di­rect ser­vices to far-flung places such as New York and Paris.

"The best way to op­er­ate to China is by hav­ing a strong part­ner­ship with one of the lo­cal air­lines,” ac­cord­ing to an ex­ec­u­tive of Jet Air­ways which has a code­share part­ner­ship with China Eastern."

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