In what could be one of the biggest orders by an Indian carrier so far this year, regional carrier Paramount Airways Pvt. Ltd will place orders worth up to $2 billion (Rs8,200 crore) for 40 Embraer jets to be delivered in three years starting 2008, according to industry executives familiar with the proposed transaction.
Chennai-based Paramount is likely to used the new planes to expand into the western region of the country in the next year followed by a national footprint by 2011. “We cannot remain a regional player in this market,” a spokesman for the airline said, but declined to confirm details of the purchase.
Paramount managing director M. Thiagarajan will meet on Tuesday Brazil President Luiz Inacio Lula da Silva, who is in India on a three-day visit. Paramount’s order for the Embraer 170/175 jets, likely to placed within the next two months, will be the second deal for Brazilian manufacturer Empresa Brasileira de Aeronáutica SA in India; the first of which was also with the Chennai airline.
Paramount, which started its operations in the second half of 2005, flew 2.25 lakh passengers—of the nearly 33 million who flew last year in the country, accounting for a tiny 0.7% of a market divided up by nine carriers.
Paramount currently uses five leased Embraer jets, together with staff, to service eight cities in the south with 52 daily flights. Last year, it ordered 15 jets of which one aircraft is expected to delivered every 45 days for the next one year. Calls and an email to Embraer executives in Singapore for comment were not returned.
Centre of Asia Pacific Aviation’s Delhi analyst Kapil Kaul said there was scope for more regional airlines in India if they avoided flying between large cities where the competition is cut-throat. “There are opportunities in other regions as only the south is dominated by short-haul ATRs,” he said.
Kaul, however, said Paramount also needs to pursue acquisition opportunities if it wants to have a national footprint. The last three months have seen three mergers taking shape, including Jet Airways (India) Ltd’s acquisition of Sahara Airlines Ltd, a purchase of a 26% stake in Deccan Aviation Ltd, which runs the Air Deccan service, by United Breweries Group that owns Kingfisher Airlines Ltd, and the merger of state-owned carriers Air India and Indian airlines.
Managing the transition will also be a challenged. “They have had aggressive plans but the moment you scale up from five aircraft you need to have more management capital in the airline. Also, having a full service operation on short haul routes requires to be tweaked given the Indian market,” he added.
With a fleet of 60 aircraft by 2011, Paramount is also expected to look into aircraft maintenance facilities for itsaircraft, currently most of which are serviced from Embraer’s matinenance facility in Singapore.
Only two large orders have been announced from India this year so far. Low-cost carrier SpiceJet Ltd had firmed up orders for 10 Boeing 737-800s at $700 million at list prices while Flyington Freighters Ltd has ordered six Airbus A330-200F, and will be the world’s first operator of the new aircraft.
The market for smaller jets in India is expected to grow further as more airlines start operations.
Indian’s subsidiary Alliance Air that is likely to look into low-cost operations as part of the merged entity with Air India Express may look at regional jets for expansion, Air India Chairman V. Thulasidas, who will lead the merged Air India-Indian Airlines, said last month.