The Hindu Business Line : `We see strong demand on the US-India route'- Mr Richard Hedges, Director, Corporate Communications Europe & Pacific, American Airlines

Logistics - Interview

`We see strong demand on the US-India route'- Mr Richard Hedges, Director, Corporate Communications Europe & Pacific, American Airlines

Ashwini Phadnis

Taking advantage of the opportunities thrown up by the Air Services Agreement signed between India and the US in April this year, the world's largest airline, American Airlines (AA), has started a daily non-stop flight between Chicago and Delhi. The importance that the US carrier attaches to the Indian market can probably be gauged from the fact that it started the service to India in just four months.

In an interview to Business Line, Mr Richard Hedges, Director, Corporate Communications Europe & Pacific, American Airlines, spells out the plans of the airlines and more.

Excerpts from the interview:

Since when has AA been evaluating the Indian market and what are its plans?

AA has been interested in serving the Indian market for several years and many of our frequent flyers have told us that it would be an important destination to feature in our network.

The conclusion of a new Air Services Agreement between the US and Indian governments earlier this year opened up the possibility of AA serving the Indian market for the first time.

The speed with which we have moved to launch our service indicates how important we regard this new route.

We are operating a daily service between Delhi and AA's major international hub, Chicago O'Hare, that provides connecting service to destinations throughout the Americas. With our partner airline, Air Sahara, we are offering flights from cities throughout India to connect with our Delhi-Chicago flights.

What are the airline's plans for penetrating the Indian market? Will the airline follow a north, west, south road map for establishing itself in the country? Will you look to a tie-up with other domestic airlines to launch services to different parts of the country?

Our partnership with Air Sahara provides convenient `feed' from the major cities and regions of India to our new service.

What prompted the start of the airline's services to Delhi? What potential do you see in the Indian market? Is it possible to provide a segment-wise break-up of the India-US market in percentage terms of corporate and leisure travellers?

The conclusion of the Air Services Agreement between the US and Indian governments earlier this year opened up the possibility of AA serving the Indian market for the first time. It is not possible for us to provide detailed figures as they are confidential.

There were close to 1.5 million passenger bookings and about 1,20,000 premium-class bookings on the US-India route during January-December 2004. How much does the airline expect the market to grow with the launch of the current flight?

We cannot provide specific performance indicators for individual routes but judging by initial sales since the launch, we see strong demand on this non-stop route.

Where does the airline see fares settling on the India-US routes, especially with prices of fuel skyrocketing and competition on the rise, and Continental Airlines offering non-stop services, and there being several one-stop options via the Pacific and Atlantic?

The India-US route is set to be very competitive. The non-stop services provided by AA and Continental Airlines provide a faster and more efficient way of getting to the US and to cities beyond the hub entry points.

We cannot publicly predict where fares might settle, but competition is likely to ensure that the consumer has a range of attractive fares and routes to choose from.

Airport infrastructure is a big issue in India with several airlines complaining that it delays their operations and does not help to provide the level of services passengers expect. Your comments and how you are tackling this.

India is seeing tremendous growth in both the domestic and international air services. The Indian Government has clearly recognised the need for the country to have `world-class' infrastructure and has initiated a number of projects to improve airport facilities. We commend this action.

On a practical level, we are pleased with the responses of the airport authority and transport officials, which have enabled us to start the service between the US and India.

Will the airline look at changing the time of the flight during the winter season as fog is a major issue at the Delhi airport?

American's Boeing 777 fleet is equipped with the latest Instrument Landing Systems which allow operations in bad weather. We do not anticipate any undue problems with our current timings.

The airline reported a third quarter loss of $153 m this year and analysts have predicted that AA will lose money during 2005 and 2006. In the given circumstances, is this the right time to launch a long-distance new flight like Chicago-Delhi, especially as any start-up would involve huge costs?

AA's Turnaround Plan, which will lead to financial recovery and sustained profitability, involves building on those elements of our service that our customers value and which differentiate AA from its new `low-cost' competitors. One of these is our international network and, in particular, the service between the world's major centres of business. This is why we have seized the opportunity to serve the India-US market.

Air Sahara is also looking at the India-US route. Will the code-share agreement remain in place even when Air Sahara launches these operations?

Yes. Any US-India service that our partner Air Sahara offers will extend the choices available to customers of both airlines.

A number of international airlines such as Lufthansa are outsourcing work from India. Does AA have any such plans? By when will these be implemented and what kind of revenue and job potential will this lead to in India?

We have no current plans for this.

Does the airline feel that there is scope for starting a low-cost less frills operation on the India-US sector to target the cost-conscious passenger?

We believe that international long-haul routes are best served by airlines that can offer a range of cabin, service and price, thereby providing more options to travellers ranging from business people to cost-conscious leisure passengers.

Our Delhi-Chicago service is operated by Boeing 777 aircraft with First, Business and Coach (Economy) cabins.

What are the plans for bringing Air Sahara on to the OneWorld global alliance?

Air Sahara has indicated its interest in joining OneWorld. However, there are no formal plans at this time.

How does the airline plan to work with the other members of OneWorld to further penetrate the Indian market?

Our new service between India and the US provides additional choices for the customers of OneWorld members. We can offer convenient connections to cities across the world with passengers enjoying the benefits and convenience provided by our OneWorld membership.

Does the airline plan to take advantage of fifth freedom rights allowed under the India-US open sky agreement? If so, to which destination beyond India will you look to operate and by when?

We have no current plans to do so.

The US is an advance-booking market while in India people make late bookings. How is the revenue or yield system geared to meet the two?

In fact, such a distinction is inaccurate or, perhaps, over-simplistic. There are a range of booking patterns for both US and Indian consumers depending on the type of traveller (business or leisure) and the travel flexibility. We have a sophisticated revenue management system which accommodates a range of purchasing patterns.

AA Cargo provides 100 million pounds of weekly cargo. As the India-US open sky agreement allows complete freedom to operate freighters, what plans does the airline have?

Our daily service provides shippers in both India and the US with a more efficient routing for cargoes.

We are marketing our capability to serve these markets and stressing the extensive network across the Americas that can be reached via the Delhi-Chicago service.

In 2001, AA purchased assets of Trans World Airlines (TWA), key strategic assets from United Airlines and US Airways that helped you get slots and aircraft. Do you see acquisition and mergers as an integral part of moving ahead in the industry? Any more A&Ms planned?

While we acquired certain assets from TWA, the deal with United Airlines and US Airways did not take place as it was dependant on a partnership between those two airlines, which was not ratified. Our current focus is on financial recovery and achieving sustained profitability and we have no A&M plans at this time.