Rumble on the Subcontinent: India’s airline market is becoming more crowded, but economic conditions are improving
In most regions, it would be more than enough drama and trauma to fill a year. But in merely the first few weeks of 2015, in the always-temperamental Indian airline sector, one new airline has taken to the skies, one incumbent airline has struggled to stay there, a number of startup airlines are waiting in the wings and the rest are watching and weighing the implications—all against a backdrop of falling fuel prices, a newly installed business-friendly government, a newly stable exchange rate (albeit at rather depreciated levels) and an economy that looks likely to do better than other large emerging markets.
On Jan. 9, Vistara became India’s newest airline, launching with the financial muscle of Singapore Airlines and India’s powerful Tata conglomerate. It immediately attacked the crowded Delhi-Mumbai market as well as the corporate-heavy Delhi-Ahmedabad and Mumbai-Ahmedabad markets. Two rivals quickly retaliated with more capacity on those routes, while another responded with big frequent flier bonuses. Vistara is playing the upscale game with three classes of service (business, premium economy and economy) and a frequent flier plan that favors the biggest spenders.
Just as Vistara got airborne, the LCC SpiceJet, nursing $300m in net losses amassed in the last three years, skirted death thanks to help from new investors, pending final government approvals (see page four)—but not before severe cash shortages briefly forced it to stop flying and left it no choice but to downsize its fleet and schedule. Rivals would have liked it to disappear, but the downsizing was nonetheless a welcome relief for the rest of the sector, most of whose contestants are still growing. In fact, partly due to SpiceJet-initiated fare wars, India’s domestic airports have seen double-digit domestic traffic growth since the start of the country’s fiscal year last April. That’s true in Delhi, Mumbai, Bangalore, Chennai and so on. All the added competing capacity also reveals how eager some carriers were to see SpiceJet go.
Vistara, of course, isn’t the only new kid on the block. AirAsia India, also backed by Tata, started flying last June, at first from Bangalore (now India’s third busiest airport) to Chennai and the leisure hotspot Goa. It has since added Pune, Kohci, Chandigarh and Jaipur. It planned to have six A320s based in the country by the end of this quarter. Instead, it has just three, tangled as it is in India’s notoriously stifling bureaucracy. As for…
The article you have previewed is premium content and available only to our paid subscribers. To continue reading become an Airline Weekly Subscriber today.
Click Here or the button below to sign up for a Free Trial.
This issue is not currently online. To inquire about purchasing a copy, please email subscription@skift.com.