Alliance Air, the feeder subsidiary of Indian Airlines, may fly Russian defence aerospace major Sukhoi's new civilian jet to connect regional locations in the country.
Alliance Air, which will be positioned as domestic budget carrier after the merger of Air-India and Indian Airlines, is in talks with Sukhoi for the possible acquisition of Superjet 100, a 60-90 seater civilian jet, which will be introduced shortly in the market.
Speaking at the Paris International Air Show, Anatoly A Mezhevov, regional sales director, Sukhoi Civil Aircraft, confirmed that the company was in talks with Indian Airlines for acquiring Sukhoi civilian jets for Alliance Air.
"Post merger of Air-India and Indian Airlines, the new entity has contacted us for future talks for Superjet 100. The talks are in the advanced stage with the national carrier," he told Business Standard.
When contacted, senior Indian Airlines officials declined comment, adding, "We are not aware of such development."
However, the airline sources added that Alliance Air would be positioned as a regional budget carrier under Air-India Express brand.
"While Air-India Express would take care of international operations, the Alliance Air fleet will cater to shorter domestic destinations. Air-India is in talks with leading regional aircraft manufacturers including Sukhoi," they added.
Alliance Air was left out when its parent company Indian Airlines placed orders for 43 Airbus aircraft and Air-India opted for 68 Boeing aircraft.
Alliance Air is not the only prospective client in India for Sukhoi's civilian venture.
"We are also in talks with the yet-to-be launched Krishna Airways. The Delhi-based travel and aviation company Bird is also talking to us apart from other existing airlines," Mezhevov said.
Earlier, Ankur Bhatia, executive director of Bird Group (which has presence in travel, aviation, IT and hospitality), hinted that the company was exploring the option of launching a regional airline.
Sukhoi will be entering a tight segment of the Indian aircraft market, which is currently dominated by the Toulouse-based ATR with an over 80 per cent share. Bombardier and Embraer have also been making aggressive moves to grab market share.
At present, about 20 per cent of India's 400 civilian aircraft are in the 100-seater or below category. By 2020, this number is expected to more than double to 200.
Sources said Sukhoi was offering a 25 per cent discount over the prices of entrenched small-jet competitors such as ATR, Bombardier and Embraer, and adding free pilot training and spares support as sweetener.
"Going by the offer, an airline can buy almost two Sukhoi jets for one from its competitor. The Brazilian made Embraer aircraft costs $40 million while a Bombardier aircraft is available for $35 million. As a part of promotional offer, the Sukhoi Superjet 100 will cost $25 million," they added.
Sukhoi's small jet, which will start delivery by 2008, might find it tough to break into the market because its 95-seater model has a take-off mass of 40,000 kg, which puts it outside the purview of a sales tax break on aviation turbine fuel for small jets that was offered in the Union Budget.
Both Embraer and Bombardier benefit from this provision, which could result in a saving of almost 30 per cent on ATF costs.
According to Sukhoi executives, Superjet 100 has enhanced capabilities for take off and landing, and claims a savings of 10 -12 per cent on fuel consumption and 10 per cent savings on operational cost against competitors.
Sources said the aircraft manufacturer was in advanced talks with several domestic airline companies, including Jet Airways, Air Deccan, Kingfisher Airlines, Paramount Airways and MDLR Airlines (regional airline operator).
The Indian defence aerospace major Hindustan Aeronautics Ltd (HAL) is also in talks with Sukhoi for participation in manufacturing activities.