Regional players may cast shadow on existing players

The proposed entry of at least four aviation start-ups that aim at operating in different regions of the country could further delay the break-even at existing airlines, which had made a combined loss of about $500 million (nearly Rs2,000 crore) in fiscal 2007 due to excess seat capacity and high fuel costs.
Domestic carriers say the lower tax paid on fuel by regional airlines and the likely aggressive pricing of their tickets can only spell bad news for them.
The ministry of civil aviation recently announced new rules for airlines planning to start regional operations between smaller cities or connecting towns with India’s large cities with small planes, typically turboprops or small passenger jets made by Bombardier Inc., Empresa Brasileira de Aeronautica SA or Embraer, and Sukhoi Aviation Holding Co., that can seat up to 100 passengers. The policy specifies that these airlines can operate from one metro airport in each region except in the South, where they have been allowed to fly between Chennai, Hyderabad and Bangalore.
Ten companies, including MDLR Airlines Pvt. Ltd, Star Aviation Pvt. Ltd, Emric Aviation Pvt. Ltd, King Air and Air Dravida, plan to start regional operations from various parts of the country. Four are likely to be awarded operating licences soon.
A top executive at one of these companies admitted his peers would likely offer low fares as a means to acquire market share. The fare reduction, said Muhamin Saidu, chief executive of Emric Aviation, would be “based on services offered”. He declined to elaborate.
But a senior executive at a national airline said he expected regional carriers to follow the strategy of any other entrant.
23/10/07 P.R. Sanjai/Livemint

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Categories: General Aviation Oct 2007, Regional Airlines Oct 2007