Air India is to launch a low-cost international arm serving points in the Middle East and South-East Asia in a move aimed at preventing emerging new carriers from eating into its already declining market share.
The state-owned national carrier's board approved the establishment of the new carrier at a directors' meeting late in May. The proposal calls for the airline, expected to be named Air India Express, to start operations on 1 April 2005.
Air India has already issued tenders seeking Boeing 737-800s to lease for the new operation. It wants up to six 737-800s seating at least 180 passengers in all-economy class configurations, on three- or five-year lease terms. The tender documents show that Air India wants galleys to be fitted in the aircraft with facilities to make hot meals, suggesting it will not be a pure no-frills operation.
The new airline will be set up under the auspices of wholly owned subsidiary Air India Charters, which is already a registered company. Air India says tickets will be priced up to 25% below those of competing international airlines and it will operate from six Indian airports.
The new carrier is being established as new low-cost players in the Middle East look to operate to India, says the airline. Growing low-cost airlines in South-East Asia have also identified India as a possible market for future operations. Air India has been losing international market share in recent years as a progressive move towards a liberalisation of air services has seen foreign carriers being allocated far more rights to serve India.
At the same time Air India has not been able to expand aggressively in the way that it needs to because government officials have long prevented it from purchasing new aircraft. Its fleet currently comprises ageing Airbus A310-300s and Boeing 747-200/300/400s, many of them leased. Late last year the board approved an internal recommendation to order 10 Airbus A340-300s and 18 Boeing 737-800s.
The recommendation came after years of studies, but formal applications for approval to firm up deals have been held up at government level. There are concerns that a recent change in government will further delay aircraft acquisitions, as the new civil aviation minister wants the carrier to take a fresh look at long-haul plans. He says the carrier should win approval for new aircraft orders by the end of the year, but in the meantime Air India is looking to lease more aircraft to meet capacity demands.
NICHOLAS IONIDES SINGAPORE
Source: Airline Business
