Ground-handling service provider Decor Aviation-promoted Air Pegasus, the latest airline to hit the Indian skies, hopes to cater to small towns and cities in south India to keep costs low as it eventually expands to north India. founder and managing director Shyson Thomas, a chartered accountant by qualification, tells Rhik Kundu and Pranav Nambiar that the airline, which started operations on April 12 this year, hopes to break even by December 2016.

What are your expansion plans?
We have started our operations by connecting Bengaluru with Hubli and Thiruvananthapuram. In the next three months, we will connect to several more destinations in south India such as Thiruvananthapuram and Bengaluru, Kozhikode and Bengaluru, Kadapa and Bengaluru, Tuticorin and Coimbatore, Chennai and Tuticorin and Coimbatore and Tirupati.

How do you plan to grow the fleet?
We have two ATR 72-500 aircraft and plan to get three more in the next two months. We hope to have 10 ATR aircraft by the end of FY16. All these aircraft will be leased from an Irish firm.

Why are you confining yourself to regional destinations?
At present, all the metros are saturated in terms of growth. They are also very expensive for a new carrier like us. Since smaller towns and cities are still underconnected in terms of flight availability, we are focusing on these markets.

How do you plan to handle the stiff competition on some of the regional routes in South India?
We haven’t started our services from Chennai at inception since yields are not very high in that market. We will, however, gradually move to it since its an important destination in the South.

Would you consider expanding to lucrative markets in other parts of the country?
Our ATR fleet, which can fly 500-700 kilometers at a stretch, is best suited for regional connectivity. We are looking to set up another regional hub in Chandigarh, possibly next fiscal, to connect with other cities and towns in the region, such as Jaipur and Bhavnagar. However, our focus during the current fiscal is on expanding in the South.

What is your initial investment in the airline? When do you expect to break even?
The promoters have so far raised Rs 100 crore for the airline, which consists of promoter capital and debt from banks.We will raise additional funds when we expand to other parts of the country. According to our internal cash flow calculations, we hope to break even in the 20th month of operations.

you, like most new players, have rolled out huge discounts immediately after launch. Will this not affect your bottom line?
New airlines are not in a position to fill their seats completely, especially immediately after launch. It is natural that 10-20% or more seats will be vacant during the first few months, which is why promotional fares are rolled out. Air Pegasus-operated aircraft have 70 seats each and 30% of these have been put up for discounts. We prefer discounted seats to flying empty.

What kind of load factor do you expect on the routes you currently fly?
In the first few days, we recorded over 75% load factor in Bangalore, Hubli and Thiruvananthapuram sectors. We are confident of recording more than 70% load factor given our competitive pricing and aircraft size. We are also confident of keeping the cost of operations lower than rivals’.

What keeps your cost of operations lower than the competition’s?
aircraft selection. If you consider Kingfisher’s fleet, the smaller ATR fleet was profit-making while the larger Airbus A320 fleet was making huge losses for the airline. Air Pregasus will stick to a single fleet of ATR aircraft, whose costs are lower than Boeing and Airbus aircraft that can travel longer distances. Also, our aircraft fly 450-500 kilometer one way and most of our flights are just hour-long, which means we can avoid some costs that airlines flying longer distances can’t.

Where will you service your fleet?
We have an agreement with Airbus. We will do maintenance checks at the company’s maintenance unit at Hosur.

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