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Airlines scramble for a piece of the Indo-US air space

August 09, 2007 10:55 IST

With both state-run Air India and private carrier Jet Airways starting their operations to US and many more flights in the offing, the Indo-US air space is all set for a battle royale between the Indian, American and European carriers.

The battle is being fought between carriers who are offering non-stop services like Air India, Kingfisher Airlines (subject to government approval), Delta Airlines and Continental Airlines and the others who see one-stop service as a better alternative to address the needs of Indian consumers.

These include Jet Airways, Sapphire Airways and, of course, all the exisiting European carriers.

In an effort to take Air India head on, Continental Airlines, which already has a daily non-stop Delhi-New York service is starting a daily non-stop Mumbai-New York flight from October 2, instead of October 31.

That apart, American start-ups like Sapphire Airlines, promoted by NRI Rahul Puranik, will have around 14 flights a week between San Francisco-Bangalore and San Francisco-Delhi.

In the market it seems the flights with a short stop-over are doing better. Jet Airways registered a Passsenger Load Factor of 100 per cent (flight launched on August 5) compared to Air-India's 50-53 per cent on its flight which launched on August 1.

However-while no major price skirmishes are expected-carriers are still dropping prices so that they do not lose out customers as a result of promotional fares being offered by Air India. The fares are expected to settle around Rs 60,000 to Rs 75,000," said an industry expert.

For instance, with Air India slashing its economy fares from Rs 54,700 to Rs 50,000 for the direct flight Delta has also cut air fares from Rs 58,000 to Rs 51,000.

However, despite an initial lukwarm response AI is expecting customers to troop in. Says an AI official: "Passengers are testing the product. This is the initial phase and we expect to break-even in the next two months. By the end of the year we will have a hundred percent seat occupancy," The US route currently accounts for 23 per cent of the airline's revenues.

The airline expects this percentage to go up to 28 per cent by the end of this year, thereby making it the top revenue earner. Air-India will no more having a monopoly in the Gulf route from 2008, which used give it 75 per cent of the revenue.

Industry experts, however feel that notwithstanding the advantage of non-stop flights, Air India will need to route one-stop flights through a hub in Europe if it wants to make a dent in the India-US market.

"Non-stop services is a great idea, if all passengers are heading to New York. But only 40 per cent of passengers go to New York and the remaining travel beyond. In that case, passengers will tend to prefer one-stop service offering seamless connections to various parts of the world," said an industry expert.

They also pointed out, given the current situation, finding a slot in Frankfurt or Munich would be difficult for any Indian carrier.

"A hub in Europe makes commercial sense as it offers more connections to other parts of the world through one's own and code-sharing network. As European carriers are taking away US traffic from India, hubs like Brussels would give more edge to Jet Airways. In the case of Air-India, it will have to deploy more destinations in US as well as India to make non-stop a success," he adds.

This is where global alliance becomes extremely important. "A hub in Frankfurt or Munich would stand A-I in much better stead than Jet since it is a much more profitable market than Brussels which is Jet Airways European hub," said Kapil Kaul, CEO, Center for Asia Pacific Aviation, Indian subcontinent.

In the international scene, the competition according to experts will come more from European carriers who already dominate 50 per cent of the US market rather than American carriers. So the names to watch out for will be Lufthansa and British Airways.

"Also carriers like Singapore Airlines and Emirates who have considerable services to the US services will be formidable competitors," said Kaul.
Anirban Chowdhury & P R Sanjai in New Delhi