‘Now’s the best time for India’s carriers to learn what has worked and what hasn’t worked around the world’

The continued turmoil within India’s commercial airline industry frustrates Alex Glock as he pores over the statistics in the Ministry of Civil Aviation’s (MoCA) Twelfth Five Year Plan (2012-17). “If ever there was a time for someone to seize an opportunity for smallercapacity jets, it’s now,” espouses the 44-year-old Vice President of Embraer’s Asia Pacific Commercial Aviation division. “The dire straits of Kingfisher and Air India are a clear indication that the country’s airline industry is still shaking out after its costly experiment with market liberalisation.”

Glock’s views are rooted in an aviation career with the Brazilian aircraft manufacturer in which he has seen the troubles of India’s airlines play out with other carriers around the world. “I had hoped that in India, managers would have learned from the mistakes of those who are now piled on the giant scrap heap of failed airlines.” Glock is an ardent believer that the family of 70- to 120-seat E-Jets is right for India.

The total number of non-stop city pairs flown by all commercial carriers has not increased since 2007. “Five years and no growth, what does that tell you?” Glock asks. Despite the presence of six major airlines and a robust delivery stream of new narrow body and turboprop aircraft, operators are not opening new routes. “Everyone is flying on top of each other, all wanting a piece of the pie. But it’s just not big enough to profitably sustain so many, chasing so few passengers at such low fares. I’ve said this so many times that I’m starting to sound like a broken record.”

Airline capacity is, indeed, highly concentrated. In 2010, the top five business routes accounted for about 34 per cent of all domestic available seat kilometres while nearly half (48 per cent) of all capacity was allocated on just 10 city pairs. As Embraer sees it, Indian carriers are locked in a market share battle on overlapping routes in limited networks with duplicated schedules. Of the country’s 274 domestic markets, there are only nine in which a single airline dominates, with traffic share that is more than twice its competitor.

Network connectivity is essential, according to Glock. “You need only to know about the success stories with 100-seat jets and the radical transformations the other countries are making to their domestic industries to appreciate the potential in India. Just look at what’s happening in Brazil, China, Central Asia and Russia.” With 75 per cent of all ASKs touching Mumbai or New Delhi, the Indian domestic network is pure hub-and-spoke. But is this simply a function of population distribution, true market demand and economics? Is India fundamentally different from other countries with large populations and huge geography?

“Absolutely not,” says Glock. “Azul Airlines in Brazil will have nearly 60 E-Jets in operation by the end of this year and has ordered another 24. By using smaller-capacity aircraft and flying to lower-cost, less-congested secondary airports and rejecting the entire hub-and-spoke business model, it’s tapped into a whole new category of price-sensitive traveller. People who could only afford to take the bus are now flying, and not just once a year. What happened in Brazil is the kind of thing that is the basis of Harvard Business School case studies.” Glock also cites the E-Jets acquisitions of China Southern and Hebei Airlines to open the vast, mineral rich provinces of western China with their new planes. “Big jets won’t work there. Those airlines and the Civil Aviation Authority of China recognised that 100-seat jets are the best solution for secondary markets. The provincial economies and passenger enplanements are skyrocketing.”