Home' Asian Aviation : AAV June 2014 Contents 32 AsianAviation | JUNE 2014
egional aviation in India has stagnated despite a doubling of overall
passenger traffic over the last five years. During that time, service to
major metropolitan areas has proliferated, while several tier-two and
- three cities remain with little or no airline service. India’s airports and
airstrips number around 450.
Tapping this regional market, startup Air Costa is connecting underserved cities
in India with a fleet (as of early May) consisting of two Embraer E-170s and two
E-190s, all on lease.
The carrier is confident the choice of regional jets will fill the need for frequencies
between smaller city pairs, something the larger narrow-bodied aircraft have been
unable to do.
Embraer signed a firm order for 50 E-Jets E2s (25 E190-E2s and 25 E-195-
E2s) with an additional 50 purchase rights with Air Costa in February during the
Singapore Air Show at an estimated cost of US$2.94 billion (at list prices) making
the airliner the first customer of E-Jet E2s in the Indian market.
With deliveries to start in 2018, the E190-E2s will be configured with six
Business and 92 Economy seats. The larger E195-E2s will have 12 Business
and 106 Economy seats. Air Costa has purchase rights are for an additional 25
E190-E2s and 25 E195-E2s.
While Air Costa’s move has raised eyebrows, it “made a conscious choice
of connecting point to point destinations,” Vivek Choudhary, chief commercial
officer and vice president, corporate finance of parent company, LEPL Projects
told Asian Aviation.
Right-sizing is working for the regional segment. “If I order a taxi, don’t send
me a mini-bus,” he said.
India’s unclear regional aviation policy needs to be better defined, said
Choudhary. The policy is also restrictive on the number of seats – a maximum
of 80 – and a weight of under 40 tons - that enables it to get incentives. “Most
regional airlines the world over have 100-120 seat [aircraft]. We’ll be happy if the
government extends the benefit to 120 seats,” said Choudhary.
Air Costa has a Southern regional license, which allows it to connect to
three metros in the South to smaller cities. However, it is not allowed to fly
city pairs between metros in the other regions - North, Northeast and West.
Constrained with routings that are straitjacketed, the airliner has applied for a
pan-India flying permit.
Headquartered at the industrial-rich Vijayawada, expected to be the capital
of the new state of Seemandhra, following the recent split of Andhra Pradesh,
Choudhary says the decision was ‘a conscious choice,’ given its plans for an
international airport. “The city will naturally grow and it will give us a first movers’
advantage...Vijayawada will be our maintenance base and Chennai our operating
base,” said Choudhary.
A recent report by consultancy KPMG said with the existing economic centres
reaching a saturation point, business activities are bound to move to newer
destinations, and “air connectivity to these new economic centers will not only
provide a fillip to the local economy but also bring in incremental traffic to existing
airports ... The launch of regional airlines such as Air Costa represents a step
in that direction.”
Interestingly, the now extinct Paramount Airways launched seven years ago
also flew an Embraer fleet. It later closed down due to poor management and
bad debts, and this has resulted in higher leasing costs for the start-up. “Inspite
of Paramount, Embraer and GECAS leased aircraft to us.” While Choudhary
is aware as a start-up airline, it does not have negotiating power, very soon,
confidence from lessors and a ‘clean image’ will result in a lower premium. ✈
Connecting the dots
Indian start-up Air Costa is filling a gap in the market, writes Neelam Mathews
Air Costa Embraer E-170
29/05/2014 8:18:10 PM
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