The rising losses in India’s aviation sector don’t seem to deter new players. After Air Asia launched operations on June 12, Tata-SIA announced it would start flying the Indian skies in October.
The story so far hasn’t been something to write home about: Rs 50,000 crore of accumulated losses, R80,000 crore of debt, rising fuel costs driven up by a depreciating currency and fare wars all the year round. That’s despite a fairly robust 13% compounded growth in passenger volumes between 2003 and 2013.
Nevertheless, the Tata-SIA airline — Vistara, a full-service airline, announced it would begin operations in October, lured by the “immense potential” of the Indian market.
“It is true there are losses, but we prefer to look into the future,” Tata-SIA CEO Phee Teik Yeoh said at the launch on Monday, adding that the airline hoped to fill the vacuum in the upper-end segment of full-service carriers created by the exit of Kingfisher Airlines.
The aviation sector was at the cusp of change with many airports being built. Vistara will be the eighth scheduled domestic airline to join the country’s Rs 95,000-crore market, among the top 10 globally, with six more, a couple of them regional aspirants, waiting for a licence. Vistara will compete directly with full-service players Jet Airways and Air India, both of whom have a low-cost arm.
While throwing open the civil aviation sector to foreign direct investment — with a cap of 49% — the government also plans to set up smaller airports and revamp others.
Carriers are hoping the 5/20 rule will be withdrawn allowing them to fly overseas before they complete five years of operations and have a fleet of 20 aircraft. Analysts say the number of aircraft is expected to double to 800 by 2020 given the Centre for Asia Pacific Aviation's prediction of a threefold growth in domestic passenger traffic in the next decade from 58 million in 2013.
Meanwhile, most carriers, especially Air India, continue to struggle. Jet Airways, which posted a Rs 4,130-crore loss in FY14 on Monday, reported a first quarter loss of Rs 258 crore. SpiceJet posted a Rs 1,003-crore loss last year and has accumulated losses of Rs 2,189 crore. IndiGo and GoAir, however, are profitable airlines.
The six new entrants have been given a no-objection certificate by the civil aviation ministry and are awaiting an air operator permit from the regulator Directorate