A third tier of Indian feeder carriers is emerging as more turboprop operators, backed by state governments and investment from home and abroad, start up in a potentially lucrative market.
The smaller carriers will fill the gap below the country's jet operators, which, with profitability still eluding them, are only now starting to match the right equipment with traffic levels on the thinner routes.
In the last two months alone, four feeder airlines have started operations. The Lucknow-based UP Air, backed by Roopali Industries, links its home city to Kulu via Delhi. VIF Airways, set up in Hyderabad by a Chicago-based non-resident Indian (NRI), operates Dornier 328 services in Andhra Pradesh.
Mesco Airlines, backed by the industrial group Mesco, operates a 12-seater turboprop in West Bengal and Orissa, while KCV serves Himachai Pradesh, Punjab and Rajastan with its single Dornier 228.
Moreover, another three feeders are in the pipeline. Gujarat Airways, backed by a Kenyan NRI, and Indo-Canadian Airways with its NRI Canadian backer should start operations by September. Raymond Industries will have five 37-seater aircraft flying by the end of the year.
Several factors are driving the surge in feeder startups. Both NEPC and Archana Airways, launched two years ago, report profits on their feeder operations. With no competition from state-owned Indian Airlines on the routes, prices are up to 30 per cent higher than on trunk routes.
Government restrictions, imposed last year on jet aircraft imports to address overcapacity and focus attention on feeder operations, are having an effect. Moreover, state governments are supporting some of the startups. In the largest state, Uttar Pradesh, the authorities have taken a 15 per cent stake in UP Air and, most significantly, have granted the carrier an exemption on fuel tax, as well as free landing rights.
Elsewhere, the Madhya Pradesh government has taken a 13 per cent stake in Archana Airways. And Mesco and Gujarat Airways are negotiating with the states of Orissa and Gujarat, respectively, for similar arrangements. 'Every state government wants its stations connected. [But] since the airline industry is extremely capital intensive, they would rather have private entrepreneurs,' says Archana chairman A K Bharatiya.
Many operators are looking at their feeder routes, where the use of larger jet aircraft has pushed carriers into the red. Sahara Airways has signed a letter of intent for five 70-seater turboprops for services from Calcutta to northeast India and from Delhi to Uttar Pradesh and Bihar. Jet Airways is to put Fokker F27s on northeastern routes, while Indian Airlines is to wet lease six 50-seater aircraft to serve the same region.
Source: Airline Business
