July 9, 2006
Red tape has airline startups wait in the wings
Nearly half a dozen new airlines that announced plans to start operations last fiscal have failed to take off, raising questions about the profitability of the Indian aviation sector and its potential to accommodate more players than it already has now.
Startups including Magic Air, East West Airlines, Jagson Airlines, Indigo Airlines and Indus Airways had announced their plans to fly early 2006 but are yet to begin commercial operations.
With the current crop of airlines under pressure due to high aviation fuel prices, are the new entrants playing a wait-and-watch game? These airlines, however, beg to differ. They attribute the delay to various approvals required to start operations.
New Delhi-based Jagson Airlines had planned for a launch in July 2006, but is still awaiting the required clearances. “We will be launching by August end,” its chief executive officer U K Bose said. “We changed our plans from being a non-scheduled to a scheduled airline. The airline is now awaiting security clearance for its directors.”
The fate of Magic Air, promoted by businesswoman Nira Radia, is also the same. As per civil aviation norms, a scheduled or non-scheduled air transport operator’s permit could be granted only to Indian citizens. Radia is a non-resident Indian. Similarly, East West Airlines, which had shut operations in the mid-1990s was planning to re-start in early 2006. However, the airline is still riddled with problems since it is yet to pay off past debts.
Established airlines like Jet Airways and SpiceJet, meanwhile, find themselves forced to sell and lease back their aircraft to be able to declare profits, while carriers like Air Deccan and Kingfisher Airlines are yet to break even. Jet Airways had posted a net profit of Rs 227.1 crore and SpiceJet Rs 4.3 crore for the first quarter of the current fiscal.
Analysts feel that even if the newcomers get all the required clearances, not all the carriers will be able to take off. “There will be consolidation in the sector. There are too many players already,” says Gautam Sinha Roy of Edelweiss Capital. Aviation experts also believe that the present infrastructure at the airports is inadequate to cater to even the existing carriers leading to parking problems and delays in take-offs and landings.