Air Deccan quotes market share figures to its advantage

Updated: Jul 31 2006, 05:30am hrs
Vishwapati Trivedi, chairman and managing director, Indian Airlines Ltd, looks like a man in hurry. With civil aviation minister Praful Patel keen on a merger of the domestic airline with Air-India, the national flag carrier, Trivedi is trying his best to get IAs employees a fair deal before the consolidation. But, of course, he is keen to extract value from his staff, in the bargain. A 1977-batch IAS officer, he is an economics post-graduate from the London School of Economics and a doctorate in international finance from Simon Fraser University, Canada.

Trivedi has been at the helm of IA for just over six months now. But, as insiders say, his ability to quickly get to the bottom of problems be it flight delays or wage negotiations with the monolith pilots union keeps the entire staff in alert.

He outlines to Atreyee Dev Roy his immediate priorities and the strategy to arrest Indian Airlines fall in market share, even as many new low cost carriers wait in their wings for a launch in India. Excerpts from the interview:

Are you concerned over the increased competition from Air Deccan and Indian Airlines fall in market share

Deccan (Air Deccan) is quoting figures to its advantage. Its market share is rising because of short-haul flights it operates in smaller cities like Belgaum, Hubli, etc with ATR aircraft. It is not viable for us to operate in these markets with bigger Airbus or Boeing aircraft.

Market-share comparisons dont hold ground, as there are almost 16 unduplicated sectors between the two airlines.

Moreover, we are flying to 18 overseas destinations and 40% of our passengers are international. But yes, he (Captain GR Gopinath) is carrying higher and higher number of passengers. But the revenue per passenger of Indian Airlines is significantly higher.

The Gulf region must be contributing significantly to your international revenues. What happens when the two-year government protection comes to an end

There are already many international airlines, which are serving that particular sector. So, it would be wrong to say that we are not facing any competition there. On the domestic front, Jet can provide us tough competition. But, I believe, Jet is not much interested in the Gulf region. It plans to focus more on long-haul flights to Europe and the United States.

So basically, Jet Airways would mean higher competition more for Air-India than for Indian Airlines.

However, after the proposed merger with Air-India, things will change. Also, with the acquisition of 43 more aircraft, we expect to regain a part of our share and account for 35-40% of the domestic market.

We are also trying to expedite the delivery of aircraft.

With the Jet-Sahara merger falling through, how do you see the market dynamics changing

We dont expect it to have any significant impact on our market share.

You have recently hiked pilot salaries by about 45%. Have other departments too made similar demands for wage increase

We have entered into wage negotiations with all. Aircraft Employees Unions wage negotiations have been on since 1997. This is the first major pay hike in many years. The raise in pilots salaries is going to cost Indian Airlines an additional annual expenditure of Rs 50 crore.

Having said that, I have managed to convince pilots to agree for a fourth landing. Earlier, it was not possible for me to ask a pilot to stop over a fourth time while flying in a particular sector, say Delhi-Jammu-Srinagar.

We have identified a number of sectors which make sense for fourth landing. This will make up for the higher spend on account of the pay hike.

It will also help Indian Airlines counter competition and pick up more passengers en route in several sectors, increasing both revenues and market share.

Can you tell us, how Indian Airlines has fared in 2005-06 And, your estimates for the current fiscal

We are expecting a profit after tax of Rs 68 crore in 2005-06, up from Rs 65 crore in the previous fiscal. But we do expect a difficult year ahead. With a hike in aviation turbine fuel imminent, and induction of new pilots, pay hike, it will be difficult to maintain the margins in 2006-07. Moreover, we are planning several engine repairs, and a complete revamp of our information technology systems too. All this will entail huge expenses and put pressure on our profit margins.

Does it mean a further rise in fuel surcharge and airfares

There are no immediate plans, but if fuel prices go up again, I do not rule an airfare hike.

The GMR-led joint venture, Delhi International Airport Limited, intends to build an integrated-terminal building. Does this mean loss of prime space for Indian Airlines

We are yet to see how things emerge under the new player. We are positive Indian Airlines will get premium space at the new airport terminal. It may mean loss in terms of revenue from the ground-handling facilities that we are providing to Kingfisher Airlines, which comes to Rs 40 crore a year. But we hope to continue providing ground-handling services to Kingfisher and several other airlines.

With different fleet configurations and organizational structures, what could be the possible model for a merger between the two national carriers

Ambit Corporate Finance and Accenture have already been appointed as consultants for the merger. But no model has been decided upon thus far. They have been given about 6-8 weeks to suggest options.

Do you think a merger with Air-India is in the best interest of Indian Airlines

It is the governments intention to merge the two state-owned carriers. It definitely makes lot of sense for Air-India.