Dethroning the Maharajah

Take for example, Singapore Airlines8217; new discounted rates. The airline is offering a Mumbai-Singapore return flight for Rs 7,000 to entice the first 10,000 tourists to the SARS-hit island city. This gimmick includes a two-night hotel stay too.

Air-India has its own plans for the region. 8220;We are re-starting our flights to Hong Kong from July 11, and starting one more flight to Singapore,8221; says Jitender Bhargava, Director Air-India.

8220;We hope to regain our market in these routes soon,8221; he adds. Before the airline suspended its flights due to SARS scare, it had daily flights to both HK and Singapore from Mumbai and Delhi.

But analysts are worried whether the airline can meet its profit estimates for fiscal 2004. 8220;The pilots8217; stir on the SARS issue and lack of new and modern aircraft can de-rail Air-India8217;s future plans,8221; says an aviation analyst.

It8217;s a sad reflection for an airline which till mid-80s had almost 50 per cent of the out-bound travel market. It has now crashed to below 20 per cent. It makes more money 8212; a whopping Rs 240 crore from foreign airlines 8212; by not utilising its bilateral rights!

Size Does Matter

At present, Air-India with a fleet size of 28 aircraft, is unable to meet demand during peak seasons. Even during the off-season it flies to West-bound destinations with near full capacity. But so do foreign airlines. The outbound traffic is growing in double digits and it8217;s mainly the foreign airlines who are increasing their flights from India.

8220;The airline has the potential to start one more daily direct non-stop flight from both Mumbai and Delhi to London and New York,8221; he adds. 8220;But it can8217;t as it does not have enough aircraft.8221;

Most of the foreign airlines are flooding the government with applications for more flights into India. Many Gulf-based airlines want direct flights from every South Indian cities to their home base to tap the growing potential of the country8217;s travelling community.

Air-India with its few and aging aircrafts needs at least 10 new aircrafts to meet its immediate demand. Its proposal to buy aircraft has been stuck at various levels in th government since the last three years which is taking its own time to decide on the proposal.

The Expansion Plan

Though Air-India has drawn up a plan to buy 17 planes worth Rs 13,000 crore, it8217;s anybody8217;s guess when the aircraft will eventually arrive. The long-drawn process and confusion over its disinvestment has already taken a huge toll on the airline8217;s market share.

The babus in the aviation ministry have also decided to tag Indian Airlines aircraft purchase order with Air-India 8212; delaying the entire expansion process further for both airlines.

While the IA Board has recommended purchase of 43 Airbus aircraft over a five-year period between 2003-08 at a cost of Rs 10,089 crore, A-I plans to acquire 17 long haul aircraft costing over Rs 13,000 crore including 10 on firm basis and the rest on option.

At present, Air India8217;s aging fleet comprises of four 747-200s aged 22.5 years, three A-300 B4s 19.7 years, eight A-310s 14.9 years and six 747-400s 7.5years and its international traffic share has declined from 33 per cent to 20 per cent in 2001, primarily due to the decline in fleet capacity.

Last Monday, Emirates announced that it has placed a massive order for 41 jets with European airplane maker Airbus worth 12.5 billion. India is one of top markets for Emirates to grow. Clearly, competition is a clear and present danger for the national carrier.

The Future is Dark

No one can predict Air-India8217;s future. As long as Indian tax-payers are available for bailing out public sector units, Air-India need not to worry. But if it has to survive, it has to change. Buying new aircraft is a solution but servicing the debt to buy new aircrafts is an equally uphill task for the airline8217;s finance managers.

8220;The airline will require a massive bailout of at least Rs 1,300 crore from the government to acquire new aircraft and reduce its high cost debts. With disinvestment at the backburner8230; the government will have no other option but to dole out this sum in near future,8221; says a former head of the airline.

The airline 8212; started by late JRD Tata 8212; needs to upgrade its products to international standards. Today, most of the passengers fly the airline for sentimental reasons. It needs to generate excitement among the dollar-paying foreigners too. Its in-flight services needs to be improved and if marketed properly can bring in enough moolah for the airline and the government.

The airline8217;s future hinges on how the government encourages the airline to make its own route assessment plans and deploy aircraft accordingly. Oldtimers still recall the 8216;experience8217; of flying Air-India. This needs to be bought back. And yes, it needs to be free of babus.