Big day (as big as the A380) for Indian aviation, but...
The Ministry of Civil Aviation in India today approved the operation of Airbus A380 aircraft into India. The text of the press circular is below:
This is indeed great news, particularly for Emirates, Singapore Airlines, and Lufthansa, which operate a fleet of A380 aircraft globally. It is also good news for Mumbai, Delhi, Bengaluru and Hyderabad airports, which are the only airports equipped to handle aircraft as large as the A380 (another matter, that all of them are private airports!).
More importantly, this move may well be connected to Air India's imminent entry into Star Alliance - possibly even a bargaining chip by Star Alliance at this stage, to let AI in. Do remember, that SQ and LH are part of Star Alliance.
But (and it's a big one, perhaps as large as the A380 itself), will any of those airlines fly to India any time soon?
One must acknowledge that the A380 is the latest offering from the Airbus stable, and is supposed to be the world's quietest aircraft. Also, its size and the ability to carry as many passengers as it can in one go, makes for great operational efficiency. However, here are my reasons why I don't see the A380 entering India yet.
For foreign airlines, India has never really been a market to introduce their top end product. Be it Singapore Airlines, Cathay Pacific or Lufthansa, most foreign airlines offer an older variant of their service product (particularly in the front cabins) or the regional variant (CX does this unfailingly). Also, the high ATF (fuel) costs in India can be a pain for airlines to handle, and it may not make sense for medium haul flights by SQ and EK to use the A380 for their India operations. It may even be a wee bit expensive for LH, even though (or because?) they fly long-haul ex-India.
Also, the Indian market continues to be dominated by low-fare seekers. Historical trends suggest that a medium- or long-haul flight generally breaks even if it flies at 80% capacity on business and first class alone (with economy being empty, virtually). On the other hand, with fares as they are, it is unlikely that anything other than a very high capacity utilisation in economy will help an airline break even on an individual flight. While business class travel is picking up, India remains a mass market than a class market.
There's a question of number of flights and capacity. Most bilateral aviation agreements with India work on a seats per week basis - called entitlements. With the current equipment being used, this provides foreign airlines the opportunity to offer multiple flights a day to some destinations in India. This allows for a mix of convenient departure times (relatively higher fares) and bad ones (but great for excellent fares), to capture as much of the market as possible. With the A380s, airlines will need to cut their frequencies, unless the bilateral agreements are modified.
Finally, Indian airline companies are bleeding losses. Only Indigo and GoAir are profitable. Air India needs repeated periodic government funding, and Jet and Spicejet incur losses virtually on every ticket sold - in other words, they'd be financially better off if they didn't operate flights! I'm not sure that actually letting foreign players introduce the A380 in India will be a sensible move, and I'm confident that the airline industry lobby is already on the ball on this one.
This is indeed great news, particularly for Emirates, Singapore Airlines, and Lufthansa, which operate a fleet of A380 aircraft globally. It is also good news for Mumbai, Delhi, Bengaluru and Hyderabad airports, which are the only airports equipped to handle aircraft as large as the A380 (another matter, that all of them are private airports!).
More importantly, this move may well be connected to Air India's imminent entry into Star Alliance - possibly even a bargaining chip by Star Alliance at this stage, to let AI in. Do remember, that SQ and LH are part of Star Alliance.
But (and it's a big one, perhaps as large as the A380 itself), will any of those airlines fly to India any time soon?
One must acknowledge that the A380 is the latest offering from the Airbus stable, and is supposed to be the world's quietest aircraft. Also, its size and the ability to carry as many passengers as it can in one go, makes for great operational efficiency. However, here are my reasons why I don't see the A380 entering India yet.
For foreign airlines, India has never really been a market to introduce their top end product. Be it Singapore Airlines, Cathay Pacific or Lufthansa, most foreign airlines offer an older variant of their service product (particularly in the front cabins) or the regional variant (CX does this unfailingly). Also, the high ATF (fuel) costs in India can be a pain for airlines to handle, and it may not make sense for medium haul flights by SQ and EK to use the A380 for their India operations. It may even be a wee bit expensive for LH, even though (or because?) they fly long-haul ex-India.
Also, the Indian market continues to be dominated by low-fare seekers. Historical trends suggest that a medium- or long-haul flight generally breaks even if it flies at 80% capacity on business and first class alone (with economy being empty, virtually). On the other hand, with fares as they are, it is unlikely that anything other than a very high capacity utilisation in economy will help an airline break even on an individual flight. While business class travel is picking up, India remains a mass market than a class market.
There's a question of number of flights and capacity. Most bilateral aviation agreements with India work on a seats per week basis - called entitlements. With the current equipment being used, this provides foreign airlines the opportunity to offer multiple flights a day to some destinations in India. This allows for a mix of convenient departure times (relatively higher fares) and bad ones (but great for excellent fares), to capture as much of the market as possible. With the A380s, airlines will need to cut their frequencies, unless the bilateral agreements are modified.
Finally, Indian airline companies are bleeding losses. Only Indigo and GoAir are profitable. Air India needs repeated periodic government funding, and Jet and Spicejet incur losses virtually on every ticket sold - in other words, they'd be financially better off if they didn't operate flights! I'm not sure that actually letting foreign players introduce the A380 in India will be a sensible move, and I'm confident that the airline industry lobby is already on the ball on this one.
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