Alliance Air, Air India’s fully owned subsidiary that operates flights to Tier II and Tier III cities, is expanding its fleet to operate more flights as it bags additional routes after the second round of bidding under the government’s subsidised air travel scheme UDAN (Ude Desh ka Aam Nagrik), aimed at boosting connectivity to the smaller towns. “Alliance Air is scheduled to add at least 10 ATR 72-600s in financial year 2017-18, of which seven have already joined the fleet and remaining three will join soon,” said an Air India official. The airline is also in the process of hiring cockpit and cabin crew for the same. Alliance Air operates air services to 46 destinations with a fleet of 13 ATR 72-600s and 2 ATR 42-320s (48 seater), with 90 daily departures and a load factor of about 90%.
Alliance Air, which was earlier the lone operator on many regional routes, finds itself pitched against not only new regional players like Zoom Air and Air Deccan but also fast-expanding private players like IndiGo, Jet Airways and SpiceJet, which deploy a majority of their capacity on trunk routes. The big private airlines see immense opportunity in regional routes with the government pushing for opening up connectivity to under-serviced but fast growing cities, with business and tourism potential. Towards this end, they are bolstering operations and adding aircraft for their regional play. In India, currently nearly 80% of the air traffic is between metro cities.
According to an Air India official, Alliance Air got 11 routes in the first round of UDAN bidding for regional connectivity scheme and 18 in the second round where 325 routes were auctioned in January. It has started flights between Jammu and Bathinda in February. Two of India’s largest airlines, IndiGo and Jet Airways were awarded a large number of these routes. Alliance has not expanded over the years and has been struggling with aircraft and manpower shortage. Its current fleet of 13 aircraft includes the recently leased seven aircraft.
As the government carries out the process of divestment for Air India, Alliance Air will likely be spun off separately as a regional airline, and there are chances that it may be snapped up by players like the Ajay Singh-promoted budget carrier SpiceJet, or others who are looking to expand their regional footprint.
Air India had ambitious plans with Alliance Air expected to act as a feeder, picking passengers from smaller cities and bringing them to Air India’s hubs for onward international connections, under its hub and spokes strategy. But due to the failure of Alliance to garner any effective market share, this plan remained largely underachieved.