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How Indian (Airlines) plans to fly high

August 11, 2006 12:41 IST
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It oscillates between the second and third slot in the industry, depending upon which parameters you use, but Indian Airlines' chief Vishwapati Trivedi is still important enough for market leader Jet Airways chief Naresh Goyal to buttonhole him for a quick chat once this interview's over. Trivedi acknowledges the problems of the past, and present, and outlines his plans to fly out of turbulence.

Excerpts from an interview with Surajeet Das Gupta & Sunil Jain:

Air Deccan says it has pushed you to the number three slot in the market.

We have not got the DGCA (Directorate General of Civil Aviation) numbers that are being talked of, and the situation changes from month to month. You can calculate shares in various ways, like the passengers in the domestic market only, or the total - after all, 40 per cent of our capacity is deployed in the international market. The key thing is domestic revenue passenger kilometres, and we're second. Jet is 29-30 per cent, we're 22 per cent and Deccan is under 20 per cent, according to us.

Low-cost carriers are gaining market share by reducing tariffs whereas your costs are high.

Food costs are the only thing that are variable really, the rest are mostly the same for everybody. Leasing, fuel and so on comprise 80-85 per cent of the flying cost. You can lower costs marginally by reducing the pitch of a seat, but that matters when you're flying full capacity, which they aren't. As for tariffs, we're still earning around Rs 4,000 a seat, which is the same as last year, and the number of discounted tickets we sold is the same proportion as well. You can show smaller discounts on more seats or deeply discount a few, the impact is the same although the visibility is different.

You're virtually killing Alliance Air, aren't you, as the A-319s that were supposed to replace its ageing 737 fleet have now been diverted to Indian. What will Alliance do now?

The operations have shrunk since we've taken back routes like Delhi-Bhopal-Indore-Mumbai and Kolkata-Imphal. Of the eleven 737s, six are operational (they'll be phased out by March) and five are being converted to freighters. The earlier decision was to, in the initial stages, replace six of the 737s by leased A-319s. But later due to engineering and pilot issues, these have been kept by Indian. But we now have a clear idea of where Alliance is going. It has four ATRs and we've got authorisation for six, Deepak (Brara, the new managing director continues to remain director, PR with Indian) has just been to Toulouse and the delivery is on schedule. The earlier strategy was to fly the same routes as Indian, the new strategy is to do hub-and-spoke for Indian, to fly to small towns/cities where demand is less. Pilots were an issue for ATRs as the Indian pilots didn't want to go to Alliance, but we've now tapped the global market and are okay.

You've got 12 planes grounded because the engines need refurbishing, and many of them are on lease -- so you're paying lease rentals but not flying. How are you tackling this?

Of the 11 aircraft not flying now, six are under routine maintenance checks. Whether the plane is leased or not is irrelevant since you lose even when your own plane is grounded. We had an accumulation of engines that need to be refurbished. I don't want to get into the past-and-future game, but instead of buying new engine parts to replace those that finished their life-cycle, we were taking them out of one engine and putting them in another - we had overdues of $30 million to engine suppliers so they stopped supplying parts. So, while we have 48 A320s, and should have been flying around 42 of them (the rest are usually on stand-by/maintenance and so on), we are flying down 37 A320s now. We've addressed this by outsourcing the repair of engines for the first time (we've done 12 engines already and have sought approvals to do 14 more) at a cost of $3-4 million each. We're getting six more aircraft at lower lease rates, and have increased usage from 3,500 hours to 4,400 on an annualised basis and so flew the same number of passengers this year with six less planes. We were flying 33-34 planes in March through May, this is up to 37 right now and will be 42 by November.

But you've got a host of planes now due for C-checks which have also accumulated.

We've had to do more C-checks since the aircraft were flying more since there were less engines. We've made a recovery plan -- I've said that whenever an engine is being serviced, the C-check has to be done at that time. We've increased the number of places we can do C-checks from. We could do only three at one time earlier (two in Delhi and one in Mumbai) but this has gone up to maybe three in Mumbai (since we don't need to do any more A300s). On one plane, we've got DGCA approval to increase the number of cycles before the check - this is perfectly safe, don't worry.
What is the cost of this? The opportunity lost in flying? The balance sheet impact?

Not all the $3-4 million is an additional cost since the engines had to be serviced anyway, and three fourths of the costs is materials - but the expenditure got bunched up. It's difficult to say what the opportunity cost was. Our seat factor remains the same 68 per cent even after we brought in more flights, so there would have been a loss. We had withdrew 10 flights on routes like Delhi-Mumbai but have restored six of these already.

What are you doing to increase attractiveness?

In another fortnight, we're moving to an industry-standard global distribution system. So, when you go to a travel agent, he can book an Indian seat on the same terminal as he does the other flights as opposed to the current situation where a separate terminal is required. It'll increase costs from 60 cents a ticket to $1.8, but is worth it. We've started giving spot fares, which is a big step forward and are putting in place an automatic revenue management system in place to get better yields while allotting seats. We're going to start London by summer and are leasing two A320s with a 275 economy and 25 business-class configuration.

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