Tuesday, October 11, 2011

Chance in India for Gulf airlines

MUMBAI // The Indian carrier Kingfisher's termination of its low-cost service, along with multilateral aviation talks set for next week, could clear the way for Gulf carriers to raise their profile in India's airspace.

Kingfisher says it plans to shut down its low-cost brand, Red, in four months because of intense competition in that market segment.

"While competition certainly exists in [the] full-service segment, such competition is tempered because of the frequent-flyer loyalty programmes that are offered by each one," Sanjay Aggarwal, Kingfisher's chief executive, said in a statement. "In short, we believe that the competition will be far more intense in the low-fare space than in the full-service space."

Kingfisher says it has decided to focus on premium services because business travel is not as price-sensitive as travel in the low-fare sector.

Industry observers said Kingfisher's exit from the budget end of the market could create an opportunity for other carriers to grab market share.

"This is a vast, untapped market," said Vivek Negi, an analyst at the stock broker WellIndia. "India has a fast-growing commercial aviation market, and potential for Gulf carriers exists. The competition is fierce in the low-fares sector, but if the government loosens up its regulations, overseas operators could succeed."

The Gulf carriers Etihad Airways, Emirates Airline, Qatar Airways and Gulf Air already fly to Indian metropolises such as Delhi, Mumbai, Chennai and Hyderabad. Qatar Airways' most recent expansion in India includes its Kolkata service, launched in August.

Etihad announced daily flights to Bangalore in March this year in addition to already existing Indian destinations including New Delhi; Chennai; Mumbai; Kozhikode, formerly Calicut; Thiruvananthapuram, formerly Trivandrum; Hyderabad and Kochi, formerly Cochin. The Gulf budget carriers Air Arabia and flydubai have also extended their networks to include Hyderabad, Mumbai, Lucknow, Delhi and Chennai. Indian officials have long objected to the expansion of Gulf-based airlines in India. The country's national auditor said recently that Middle Eastern carriers should be made to reduce, not increase, their services to India as a means of protecting the state-owned Air India.

But foreign carriers could get a further boost ahead of the next week's meeting of the International Civil Aviation Organization. The meeting is to focus on relaxing India's bilateral flight allocation agreements.

India froze its bilateral rights on additional seats last year in an attempt to boost the financial performance of Air India. Representatives of more than 40 countries are to meet, which means the opening of new routes could be a step closer. One analyst thinks that even existing routes could be allowed to expand.

"Many of the countries attending already have agreements," said the analyst who asked not to be named. "Now it may be a question of extending them."

Kingfisher currently has several daily flights to the Gulf, and it, too, might be able increase its flights to the region, said Kapil Kaul, the chief executive for South Asia at the Centre for Asia Pacific Aviation (Capa), a research institute. "The airline will continue to operate to the Gulf and increase frequency subject to availability of traffic rights," Mr Kaul said. "I expect Kingfisher to expand its international operations, especially to Gulf from various points of call in India by increasing utilisation of the existing fleet."

India is potentially a lucrative market for overseas carriers. It is the world's ninth-largest - and currently the fastest-growing - commercial aviation market. Only 2 per cent of Indians fly today, according to data from Capa.

Kingfisher's ascent into turbulence

No comments:

Post a Comment