NEWS
IndiGo Airlines may lose a good chunk of its commanders to AirAsia India as around 100 of its pilots have applied for jobs with the proposed carrier. Besides a hefty package that AirAsia India is offering, there are other reasons such as better working conditions that is attracting IndiGo pilots to AirAsia India. IndiGo currently has around 1,000 pilots to operate its fleet of 66 Airbus planes. Out of these, nearly 60 per cent of them are commanders. AirAsia in collaboration with Tata Sons and Telestra TradePlace of Arun Bhatia, plans to launch a budget airline by the end of the year with its headquarters in Chennai. AirAsia is expected to bring in competitive pricing in the domestic aviation market with its “nano” airfares.

VIEWS
It is somewhat strange that an exodus of commanders from IndiGo Airlines should take place soon after the privately owned low-cost carrier, India’s largest airline by market share, was conferred the award of “Best Low-Cost Airline in Central Asia and India” at the SKYTRAX World Airline Awards at the Paris Air Show in June 2013. Incidentally, this was the fourth year in a row that IndiGo Airlines has been honoured in this fashion. At first sight, it appears that commanders from IndiGo are gravitating towards AirAsia India drawn by the lure of higher salaries coupled with reportedly better working conditions. But what is also surprising is that AirAsia India is not looking to employ commanders from Kingfisher Airlines who are also experienced on Airbus family of airliners and currently unemployed. These pilots are available in fairly large numbers and would possibly be prepared to work for lower salaries.

Whatever be the real reason behind AirAsia India sourcing commanders from IndiGo, one unintended consequence would be that the sudden departure of 100-odd commanders would for some time, destabilise operations of IndiGo Airlines as AirAsia India would select and induct the best of the lot of commanders from IndiGo. This would automatically be to the advantage of AirAsia India as IndiGo Airlines is expected to be the major competitor at least in the domestic segment of the market.

It is generally acknowledged that the airline industry in India has considerable potential for growth given the huge segments of the population in Tier-II, III and IV cities where despite proclamations from the top echelons of the Ministry of Civil Aviation, air connectivity at present is highly limited primarily on account of paucity of infrastructure by way of airfields. But the airline industry in India as elsewhere in the world, is also highly vulnerable to upheavals in the economy. Here in India, the industry is also constantly battered by unfriendly regulatory framework as also high input costs such as exorbitant airport charges, unreasonably high taxes, continuous downslide in the value of the Indian rupee against the US dollar and the perpetually rising cost of aviation turbine fuel (ATF). The deleterious effect of all these factors combined is aggravated further by fierce competition that is often inclined to drive fares downwards to sometimes ridiculously low levels. Under these operating conditions, airlines in the private sector, both low-cost and legacy carriers, find it difficult to maintain bottom lines and remain afloat with profitability which is a far cry. Business models of private carriers have generally been floundering in the hostile operating environment particularly over the last 10 years leading to mergers and acquisitions as also in a number of private airlines closing down. Despite the backing of a huge financial empire and the enormous financial clout of the UB Group, even Kingfisher Airlines could not survive.

As it stands, AirAsia India is planning to commence operations sometime end of the year initially with a fleet of three aircraft growing to 36 aircraft by 2018. To begin with, AirAsia India will be connecting to destinations in the southern region of India as also Madurai with Kuala Lumpur. Although AirAsia is confident of replicating its successful low-cost model in India, the airline will be faced with new challenges here. Unlike in Malaysia where AirAsia has monopoly in the low-cost segment, in India it will face competition from a number of legacy and budget carriers. AirAsia’s international operations into India so far is not reported to be eminently successful as the fare structure offered by the airline in Malaysia where fuel and other input costs as compared to India are much lower, has not been sustainable in India. While the airline may enter the Indian domestic market with fares at rock-bottom, it can only serve as a promotional exercise lasting perhaps not more than a few days.

Another development of concern for AirAsia India is a communication to Prime Minister Manmohan Singh by Subramaniam Swamy, President, Janata Party, stating that the clearance accorded by the Foreign Investment Promotion Board to AirAsia to set up an airline in India is “not legally valid” and that he perceives this as “an attempt to destroy the domestic airlines, creating a systemic risk for financial institutions and loss to public exchequer”. Describing the proposal as fraudulent, he urged the Prime Minister to revoke the deal failing which he would resort to a public interest litigation (PIL). For AirAsia India, there is considerable turbulence in the skies ahead!