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Home > Business > Special

A new aircraft every week, and more

Bipin Chandran & PR Sanjai | December 28, 2005

Indian carriers will press into service a new aircraft in every week of 2006. All told, they are expected to buy or take on lease 60 new aircraft during the year, increasing their fleet size by over a third, from 175 now to 235 a year from now.

Passengers may groan at the prospect of more delayed landings and take-offs on account of airport congestion. But entrepreneurial enthusiasm is undimmed. In a second year of frenetic action, half a dozen new carriers are slated to start operations in 2006, and at least four airlines are expected to float initial public offerings.

Kingfisher Airlines IPO in 2006

Jet Airways set the ball rolling by raising Rs 1,200 crore (Rs 12 billion) from the market in February this year. Air Deccan, SpiceJet and Paramount raised funds worth $150 million from private equity firms in 2005. Next year, apart from state-owned Air-India and Indian Airlines, Air Deccan and Kingfisher Airlines are expected to hit the market with IPOs.

"With the new aircraft joining our fleet, money raised from the IPO and the new brand (Indian Airlines recently changed its brand to Indian), we will be in a stronger position in the market," says Sushma Chawla, chairman and managing director of Indian Airlines.

A traffic jam in the Indian skies

Chawla needs the money as India's skies have turned dramatically more competitive; the new low-cost carriers have ended 2005 with a market share of 25 per cent. Industry experts say this could rise to 40 per cent in a year's time. "Look at us; our market share has grown to 6 per cent in just six months," says Vijay Mallya of Kingfisher Airlines.

Among the new low-cost carriers waiting to take wing in 2006 are IndiGO, Magic Air, East West, Indus, Premier and Star Air. They will want to imitate predecessors like Air Deccan, which in 24 months has acquired 24 planes.

"Next year, the new carriers will have a combined fleet size of about 95 aircraft, up from 40-45 now. They will then be able to compete well with the likes of Jet Airways and Indian Airlines," says Kapil Kaul, chief executive, Centre for Asia Pacific Aviation.

Aviation: A goldmine of opportunities

Indian carriers grabbed world attention in 2005 when they placed large orders for new aircraft. Out of the total of 280 aircraft signed up by Airbus at the Paris Air Show, 135 were from Indian carriers. A good number of these planes will be delivered in 2006.

Flyers will therefore get more choice and perhaps even sweeter fare deals. The flip side will certainly be more congestion at the airports and longer delays. The government's action plan for the year includes opening a new runway each at Delhi and Mumbai during the first quarter of 2006, but terminal throughput capacity and even car parking remain serious constraints.

However, the government is expected to take several key decisions: Contracts for the privatisation and modernisation of the Mumbai and Delhi airports are almost certain to be handed out early in the new year, and foreign carriers and persons of Indian origin may be allowed to take stakes in Indian carriers.

Private carriers like Jet Airways and Air Sahara are hoping that new international routes, to Frankfurt and Hong Kong, will be opened for them during 2006.

And then there is that big question: What will be the fate of Air Sahara? Will Vijay Mallya succeed in his bid to acquire it and leapfrog to an enviable third position in the aviation sweepstakes?

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