Financial Daily from THE HINDU group of publications
Monday, Jan 17, 2005
Financial Daily from THE HINDU group of publications Monday, Jan 17, 2005 |
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Airlines Opinion - Interview To take on competition, Air India must expand — Mr V. Thulasidas, Chairman and Managing Director, Air India Tunia Cherian George
In a market that is set to witness a lot of action in the low-cost segment, Air-India is preparing its own no-frills airline, Air-India Express. At the same time, it is in the midst of finalising a shopping-list of wide-body aircraft to expand its network of destinations. These key decisions come in the backdrop of a fast opening up aviation scenario. The Air-India Chairman and Managing Director, Mr V. Thulasidas, looks back on an `exciting' first year at the helm. Excerpts from the interview: How do you see AI in a direct face-off with domestic carriers in overseas routes? The policy decision has been in the offing for quite some time. It has not come as a surprise to us. Air-India has to improve its services to remain competitive. It has no right to continue in this business, if it cannot take on the competition. Do you think the domestic carriers will be able to eat into AI's market share? Well, that will depend on how they position themselves and perform. The market is growing and there is scope to exploit the expanding market, and even come out on top of the competition. Please throw some light on your aircraft acquisition plans. We are ready to acquire aircraft. As per the earlier plan, we were to acquire 28 aircraft — 18 small capacity and 10 wide-body. This is no longer valid. Our current plan is to acquire 68 aircraft, 50 of which will be wide-body for AI and 18 smaller aircraft for Air-India Express. The project proposal for the 18 smaller aircraft has been submitted to the Government and we are awaiting its approval. And for the 50 wide-body aircraft, we have received request for proposals (RFPs) from both aircraft and engine manufacturers. As a government organisation, do you think your plans will be held up by procedural delays? Well, the Government is very supportive of AI's plans to acquire aircraft. It wants AI to grow. I have directions to this effect from the Ministry of Civil Aviation and the Prime Minister. But we often see a delay... There was a delay, I agree. But things are moving fairly fast now. After it was decided that we should revisit the proposal, we have moved fast. We have sent in the project report for smaller aircraft and have received proposals for wide-body aircraft and we hope to send the same to the Government by January-end. Some airlines have imposed a fuel surcharge. What about AI? We have also imposed a surcharge but that does not account for the huge increase in fuel prices. There is another thing that we ought to have done earlier. AI should have gone in for hedging. If we had done that two years back, it would have been able to create a cushion against the rise, as most international airlines have done. In which case, will you be tying up with an oil company? We will have a financial partner who will do the hedging for us across the world. When do you expect to get approval for the 18 B737-800 aircraft for AI Express? We hope to get the approval by March 31. Then, we will finalise the terms and conditions of the purchase before placing a supply order. Delivery would begin 12 months hence. We expect to receive the first of the B737-800 by the summer of 2006. These aircraft have a capacity to carry about 180 passengers in the economy class. How was the last year for you? It has been a very exciting year for me. The main task was AI was in need of expansion. I have maintained from Day 1 that it needs to augment its fleet. I believed that fleet size should double in two/three years. Today, we have 35 aircraft and have added five-six aircraft on lease in the last year. We should continue to lease in 2005, though it is not easy to tie up aircraft in a tight lease market. We should receive our own aircraft from 2006. What are the other achievements over this period? We have realised the need to improve AI's product and services and taken steps in that direction. I cannot claim that we have suddenly enhanced the quality, but we have made a small improvement. We are in the process of upgrading our existing aircraft. Also, there is an awareness among the employees that the whole company needs to adopt a service-oriented outlook; at least two unions have issued circulars to their members explaining the need to reorient their outlook. People should accept the need for change. If that happens, AI will be able to take on any competition. We have also put in place a vision document for the next five-six years. It talks about where AI should go, its inherent strengths, the competition, and the benchmarking required. What about your new services? We have introduced services to Los Angeles. We fly there five times a week as against thrice a week earlier. We have also started an Ahmedabad-London service via Mumbai and now a Mumbai-London flight. We have also introduced a Delhi-London service and plan to launch a Delhi-Los Angeles service by March and more Delhi-London services by the end of this winter. I hope we will soon be able to offer the Amritsar-Delhi-Birmingham-Toronto flight and. We will also launch the AI Express flights from March. Could we have the details? While we have not finalised all the destinations for the low-cost carrier at the moment, in the first phase, we will fly between stations in Kerala and the Gulf. We have not been able to lease as many aircraft as we had planned to. We will begin services with three aircraft that we have tied up so far. We hope to start these services from March 27, with the start of the summer schedule. A number of international carriers have availed themselves of the open sky policy. Has the additional capacity affected your loads? Have prices dropped on account of the additional capacity? We have also increased our capacity. So, by and large, our existing flights are going full. However, our new flights to London are yet to pick up. Yes, prices have come down on certain sectors, which shows that the capacity has increased. Whether it is in excess of demand, remains to be seen. If there is excess capacity, obviously, all the airlines will face some difficulties. Have you covered new ground in your understanding with Lufthansa? We have a free-flow code share with the German carrier. We also have an understanding with them on the frequent flyer programme of both carriers. Basically, AI passengers will be able to fly on all flights of the German carrier from India as well as on certain of its sectors abroad. What about your recruitment plans? Yes, we are recruiting pilots regularly. All new recruits are being taken on as co-pilots. After training and flying for a certain number of hours they will become commanders. As we introduce new types of aircraft such as the Boeing 737-800 and the Boeing 777, we will be recruiting pilots from India and abroad. These pilots, who are of the rank of commanders, are being taken on short-term contracts. What was your market share last year? In 2003, we had 20 per cent of the Indian market. We are looking at a 10 per cent growth. Delta Airlines is planning to offer services to the US from Chennai. What are AI's plans on this front? We are planning something, but it is unlikely to materialise in the first-half of 2005. The aircraft acquisition plans provide for flights from Chennai, Bangalore and Kolkata. A link is also planned from Kerala to Bangalore and further to Europe. The introduction of these services will be decided by market demand. But we need to augment our fleet strength for this. We have several other places to fly to. We hope to open operations to Australia via Singapore in 2005, as well as a Delhi-Toronto operation via Birmingham, and South Africa via Mauritius. We also plan to increase the frequency to Shanghai and, at a later stage, to Beijing.
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