At a time when the airline industry in India is not in a happy state, a business group from Andhra Pradesh unknown in the airline industry has dared to enter the fray. On October 14 this year, Vijayawada-based Lingamaneni Estates Private Limited (LEPL Group), which is into real estate and other businesses, launched Air Costa, with its first flight between Hyderabad and Vijayawada. This move is set to boost regional aviation, which on the Indian aviation scene, for some reason or the other, has been floundering. The airline, which initially planned to commence operations with a fleet of Bombardier Q-400 aircraft, subsequently plumped for the Brazilian Embraer E170 jets that dominate the global regional aviation scene. Air Costa presently has in its fleet two Embraer E170 aircraft, a third on lease and is buying one E190 soon to take its initial route connectivity up from four to eight. It may be mentioned here that Embraer has bounced back in India after the closure of Paramount Airways that operated E-Jets.

With plans to tap the hinterland market by connecting Tier II and Tier III cities in India, Air Costa has announced an ambitious investment plan of $150 million by 2015. The group first received a no objection certificate from the Ministry of Civil Aviation in February 2012, and in June 2013, at the Paris Air Show, Le Bourget, it announced its intention to go in for Embraer jets. Having received its Air Operators’ Permit (AOP) from the Directorate General of Civil Aviation (DGCA) in September 2013, Air Costa commenced operations in October with plans to set up a Maintenance, Repair and Overhaul (MRO) facility at Gannavaram Airport near Vijayawada by 2015. Presently, its maintenance centre is at the Chennai International Airport.

The airline has leased two E170 jets from ECC and the third is due from GECAS soon. The plan is to have five E170s and E190s by the end of 2013, ten by 2014 and a total of 25 aircraft by 2018. Presently, Air Costa has operations from Ahmedabad, Bengaluru, Chennai, Hyderabad, Jaipur and Vijayawada. Chennai is planned to be the operations hub of the airline. In the near future, there are plans to connect Visakhapatnam, Goa, Madurai, Thiruvananthapuram and Mysore.

“We are adopting an operational strategy wherein we would be focussing mostly on under-served and lesser competitive routes,” Air Costa Chairman Lingamaneni Ramesh stated ahead of the launch. Air Costa will have unconventional city-pairs connecting Tier-II and Tier-III cities, looking at routes not served by established carriers. It plans on having pan-India operations by 2015, with 14 routes and connect 25 destinations in three years from then. Air Costa will follow a flexi-fare system with the lowest fare being Rs. 3,000. The aircraft is configured to seat 67 passengers in economy and economy plus class.

Currently, the low-cost airline has about 300 employees including foreign pilots and engineers. According to Deepak David, financial adviser to LEPL, air travel is expected to grow steadily in India with a compound annual growth rate of 20 per 2014. Rapid urbanisation has led to the burst in traffic between metros and non-metros, he said, adding there was scarcity for regional and charter operations in South India. “There is a huge market potential in such point-to-point and feeder routes, which offer 59 per cent of potential revenue per kilo metres (RPKMs). These are the non-trunk routes that Air Costa will tap into.”

John Slattery, Chief Commercial Officer (CCO), Embraer Commercial Aviation said, “We are delighted that Air Costa has chosen the E-Jets for their operations. The aircraft are sure to promote greater regional connectivity in India.Embraer has always maintained that the regional aviation market in India has tremendous potential. Our E-Jets are the right sized aircraft for service between secondary and tertiary markets which are underserved and are, in fact, growing faster than metro markets.”

“Air Costa has chosen E-Jets for their efficiency and reliability. Our plan is to link underserved markets in India with more direct flights,” said Captain Babu, CEO – Air Costa. “The E170 and E190 jets are ideal in size and range. We can add frequencies and routes without adding too much capacity, thus serving places with seasonal demand, as well as key secondary and tertiary business centres.”

“Regional services have a lot of potential in India especially as the economy of South Indian cities is booming. We are committed to further growth in the Indian market with additions to our fleet and launching new routes over the medium term,” said Ramesh Lingamaneni, “We are very pleased with the support that Embraer has provided to date for the launch of our Air Costa and we look forward to a long successful and mutually rewarding relationship.”

Founded in 1983 by first-generation entrepreneur LP Bhaskar Rao, the privately-held Lingamaneni group, has tasted success in real estate and construction business. The group has completed many real estate projects in Vijayawada and is currently building a satellite township project in an area of 32 million square feet with an investment of close to a billion dollars, according to media reports. The group’s website says it also has a presence in other sectors such as renewable energy, health care, education and hospitality. It remains to be seen how the group’s fledgling airline is going to navigate through turbulent skies.