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Data released in November by the DGCA revealed
capacity -- including the number of fights and seats
-- was down by 6 percent, while demand had fallen
by more than 7 percent.
However, the resultant closer alignment in the
market between capacity and demand has seen
yields strengthen, and several airlines are now
making profits, at least in the peak periods of the
year, a recent report by the Centre for Asia Pacific
Aviation (CAPA) said.
CAPA added that the decision to allow 49 percent
foreign airline investment may lead to more than one
such transaction being completed in the coming year.
"This will have a significant positive impact,
in terms of capital and sentiment, in raising the
professionalism of the sector and bringing India's
market in line with 21st century global aviation.
New aircraft orders will be placed in 2013/14 as
the market starts to look ahead to the next phase
Cost pressures and a weak policy environment will
continue to be a challenge in 2013, analysts predict.
According to Qatar's Al Baker: "India is a huge
market and a potentially lucrative one. While we
have expressed interest in expanding our presence
in India, we will only be interested in any potential
investment once we are sure regulations and laws
are properly liberalized." His comment is a significant
indicator why foreign airlines are being slow to jump
aboard the FDI bandwagon.
A recent directive by aviation minister Ajit Singh,
making him the final approving authority for any
import of aircraft to India -- overruling an empowered
aircraft acquisition committee (AAC) headed by
senior government officials that previously cleared
requests from airlines, charter companies and private
individuals to buy aircraft -- is rattling airlines, whose
business plans for fleet size and deliveries have been
planned and are currently under implementation.
This, airlines say, will only delay the process further,
given the minister's busy schedule. However, Singh
points out that some previous acquisition decisions
have been flawed. For example, the low-cost carriers
that started up in India over the past decade were
meant to promote regional connectivity to smaller
towns, which they have been unable to do, as the
narrowbody jetliners they acquired are not the ideal
fit for destinations with smaller runways.
"His aim to be the final approver is to ensure
regional connectivity is not lost sight of, while clearing
airlines' requests to bring in planes," an aviation official
says. Airlines have taken the move badly. "Can we
change our business plan at the whims and fancies
of a minister?" one airline official told Asian Aviation
on condition of anonymity.
One immediate victim of this decision is IndiGo,
which, along with Indonesia's Lion Air, had the
second-highest capacity growth among all the world's
budget carriers in 2012 (lagging only Spain's Vueling).
The carrier has been rapidly expanding by adding
new routes, having added 70 flights on domestic and
international services, according to CAPA.
The company received a rude shock, according to
the newspaper Mint, when it was allowed to import
only five of the 16 aircraft it had sought to in 2013 -- a
move some analysts see as a setback to its expansion
plans. IndiGo now has 61 aircraft and had plans to
end 2013 with ten more, taking its fleet size to 71.
The carrier has 209 aircraft on order from
Airbus, with deliveries spread out until 2025 at an
average of 17 aircraft a year -- provided that the
ministry approves. Mohan Ranganthan, member
of the government-appointed Civil Aviation Safety
Advisory Council, was quoted in Mint as saying that
the ministry's move would, apart from handicapping
IndiGo, also send out the wrong signal to investors.
SECOND MRO IN SRI LANKA
As the construction of Sri Lanka's second
international airport in Hambantota, in
the south of the country, nears completion
by summer, the airport will offer a
Maintenance, Repair and Overhaul (MRO)
facility to meet the needs of neighbouring
markets, including India.
Sri Lankan Information minister
Keheliya Rambukwelle said recently that
cabinet approval had been granted to
obtain foreign financial assistance for
the project from the China Exim Bank,
which has granted an US$80 million
loan for the facility. The MRO facility will
be constructed by the China Harbour
Corporation, also the contractor for the
In 2009, SriLankan Airlines' MRO unit at
Colombo had been carrying out C-checks
on aircraft belonging to budget carrier
Indigo. At the time, the airline had only 24
aircraft, compared with 62 today.
"Safety is also linked to the financial
health of a carrier, and that is of
concern to us." -- anonymous DGCA
Financially troubled Kingfisher has had to moderate its ambitions since the days when it ordered Airbus A380s.
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