It is known to make millionaires out of billionaires. But daring entrepreneurs continue to flock to the Indian aviation sector and their airlines are making some headway albeit slowly.

Two airlines — Air Costa and AirAsia India — started operations in the past 12 months taking the number of players in the domestic skies to seven. With the two new entrants showing steady increase in passenger traffic, the competition is set to hot up.

Focus on southern market

Launched in October last year, Air Costa — a regional airline with a focus mainly on the Southern market — has grown its passenger traffic from 16,000 in January to 60,000 in August. With this, it has garnered share of a little more than 1 per cent in the domestic market.

AirAsia India since its launch in June has tripled its traffic from 12,000 to 36,000; its market share stands at 0.6 per cent. This may be tiny compared with the share of the market leaders IndiGo (32.6 per cent), Jet Airways (20.1 cent) and SpiceJet (19.5 per cent).But these are early days, yet.

Dip in PLF

A low base and new route launches have helped the new entrants grow their passenger numbers.

Air Costa now connects nine destinations while AirAsia India links six. Passenger load factors (seats filled as a proportion of those available) though have fallen. Air Costa filled 75-81 per cent of its seats between March and May; this fell to about 66 per cent in August.

AirAsia too has seen its load factor fall from 80 per cent in June to 73 per cent in August. But this may be due to seasonal factors (the September quarter is generally a weak one) and growth pangs.

Even so, as the new airlines aim to increase capacity and expand into new markets, they may find the going tougher. One, the incumbent airlines are fighting tooth and nail to protect their turf as seen in the price wars over the past few months. Then, there is the problem of inadequate infrastructure. According to Amber Dubey, Partner and India Head of Aerospace and Defence at global consultancy KPMG, “New airlines will face slot congestion especially in land-constrained airports such as Mumbai, Chennai, and Goa. There’s an urgent need for the Centre to push for speedy implementation of the new airports in these locations.”

Growing competition

The competition is only going to get more intense with Vistara (the Tata-SIA joint venture) and six new airlines (three national and three regional) waiting in the wings. With the number of contenders set to double to 14 in the next 12-18 months, there is likely to be a dog fight in the Indian skies.

Says Dubey, “It will be a crowded place. We may see exit or merger of a few airlines in the next 12-18 months. The key to success is to have a clear positioning, customer focus, cost efficiency, on-time performance and careful route selection.”

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