With new aircraft and foreign routes, Air Costa sheds the regional tag

One-year-old regional airline Air Costa is set to shed its regional tag as well as de-merge from its parent company as it plans to expand its operations.

A top official told BusinessLine that the Andhra Pradesh High Court is set to approve the demerger of Air Costa from its parent, LEPL Projects Ltd. “This will help get us the right kind of valuation from investors,” the official said. The airline has also applied to the regulator DGCA for converting itself into a national airline.

Air Costa Chairman, Ramesh Lingamaneni, said that the airline started posting operational profits in the last few months and is expected to post net profits by the end of the current financial year. “We want to grow steadily rather than in fits and starts. We have always been very careful with our money,” he said.

The airline also plans to fly international routes and is expected to either buy or lease an Airbus or a Boeing for this purpose. Air Costa has placed orders for 50 Embraer aircraft for $3 billion and has another 50 on options starting from 2018. It currently operates four Embraer aircraft and flies to nine cities with 38 flights every day.

The airline’s CEO, Capt KN Babu, said Air Costa is also planning to set up an MRO (maintenance, repair and overhaul) and has already acquired three acres in this regard.

The airline’s chief financial officer, Vivek Choudhary, said that the company will not immediately need funds as it still to fully utilise the $100 million it had initially earmarked. He said every year four aircraft will be taken on lease. For this, the airline is in talks with Embraer as well as with leasing company GECAS.

Air Costa’s Vice-President for revenue management and network planning, S Vasudevan, said the passenger load factor of the airline was slightly over 71 per cent, which was considered good for a new airline. The average utilisation was about 9.5 hours a day. The 78-seater E170’s utilisation was about seven hours and that of the 112-seater E190 utilisation was 14.5 hours.

He pointed out that the RASK (revenue per available seat kilometre), which is used to measure the efficiency of an airline, was about ₹4. He admitted that it was a bit low but it was growing steadily.

The company recently raised the salary of its 70-odd pilots by 30 per cent to control attrition. It has a total of 740 employees, which works out to 185 employees for each aircraft, which, according to Choudhary, was good enough average.

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