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Real estate company to start India’s eighth airline

Real estate company to start India’s eighth airline
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First Published: Fri, Mar 09 2007. 02 51 PM IST
Updated: Fri, Mar 09 2007. 02 51 PM IST
By Santanu Choudhury, Bloomberg
NEW DELHI: MDLR Airlines Pvt, a start-up Indian carrier funded by a real estate company, plans to begin flights this month and buy as many as five turboprop planes, making it the eighth new airline in India in four years.
MDLR (Murli Dhar Lakh Ram group) has leased two Avro RJ70 planes from BAE Systems Plc, Europe’s largest defense company, and will add three more by December, said Harsh Vardhan, the airline’s director.
MDLR, based in the Delhi suburb of Gurgaon, will add to rising competition in a market where combined losses are expected to widen to $500 million (Rs2,214 crore) in the fiscal year ending 31March, according to the centre for Asia Pacific Aviation. The competition, high taxes on jet fuel and inadequate airport infrastructure are hurting India’s carriers.
“There is a lot of potential in regional airlines, but it depends on how much financial and intellectual capital a company has to run the business,” said Kapil Kaul, chief executive officer of the aviation centre’s India unit. “I don’t think the four-engine aircraft MDLR is a right choice, because it’s an obsolete technology,” he added.
Seven carriers, including four low-fare operators, started in India in the past four years, and another five have sought government approval. The growing competition has put pressure on so-called legacy carriers such as Jet Airways (India) Ltd, the nation’s biggest airline, and state-run Indian Airlines Ltd, to lower fares.
Low-Fare Airlines
Low-fare airlines will double their market share to 70% by 2010 from 35% in November, the centre said on 6 March. Consolidation will increase as airlines strive to expand and boost their market share, the report said.
MDLR, owned by the Murli Dhar Lakh Ram group, will initially operate chartered flights to smaller cities, Vardhan said. The airline will soon apply for a license with the government to operate regular flights.
India’s carriers ordered more than $20 billion of planes in the past two years to connect more towns and cities in the world’s second-fastest growing major economy, home to one out of every six people on Earth.
The carriers are buying turboprops and small jets to connect as many as 35 cities and “urban agglomerations” that have a combined population of more than 1 million, according to the 2001 census.
“There are a number of virgin markets in India where we can operate without touching the big cities,” Vardhan said. “A lot of untapped demand is emerging.”
ATR, Bombardier
In addition to leasing planes, MDLR is in talks with Avions de Transport Regional and Bombardier Inc. to buy at least five turboprop aircraft, Vardhan said.
“We are looking at the Bombardier Q400 and the ATR-72,” Vardhan said. “We should be able to take a decision on either of them within three months.”
MDLR plans to buy the planes with cash and by borrowing, Vardhan said. “We want to have a fleet of 10 planes, including five turboprops, in 18 months,” he said.
Jet Airways, Deccan Aviation Ltd, Kingfisher Airlines Ltd and Indian Airlines use turboprop planes manufactured by Avions de Transport. Start-up airlines Paramount Airways and Sahara Airlines Ltd use regional jets from Empresa Brasileira de Aeronautica SA and Bombardier.
MDLR also plans to buy helicopters to offer charter flights to corporations, Vardhan said.
Indian airlines flew about 29 million passengers in the 11 first months of last year, a 47% increase from a year earlier, according to the civil aviation ministry. The market will grow 25% each year in the next decade, Civil Aviation Minister Praful Patel said on 8 February in Bangalore.
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First Published: Fri, Mar 09 2007. 02 51 PM IST
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