International airlines trim flights to India

International airlines trim flights to India

Mumbai: At least six global airlines have in February cut flights in India, the world’s ninth-largest aviation market, hit by high cost of operations at local airports and a global economic slowdown that has compelled them to cut costs.

Malaysian low-fare carrier AirAsia Berhad had suspended its operations from the Hyderabad airport on 11 January, two months after GMR Hyderabad Airport Pvt. Ltd (Ghial) nearly doubled international passenger charges to quicken profitability.

Deutsche Lufthansa will suspend its Kolkata-Frankfurt operations from 25 March. Its group airline, Austrian Airlines, said on Monday it will stop Vienna-Mumbai service on 25 March because of a challenging economic situation.

Also See | Departure Schedule (PDF)

Citing seasonal rearrangements, Air France, too, said it will reduce its flights to India to 18 a week instead of 21. American Airlines will stop Chicago-Delhi flights by end February.

Pieter De Man, general manager, Indian sub-continent, Air France-KLM, said the summer season (April-October) in India is considered weak since demand drops “while for the (other) destinations in our network, the demand increases".

In January, Malaysian low-fare carrier AirAsia X Sdn Bhd said it would withdraw services to India from its Kuala Lumpur hub by March-end, citing a steep increase in costs at Delhi and Mumbai airports.

Hj Azizan Noordin, acting director general at Malaysia Tourism Board, admitted that AirAsia pulling out from Mumbai and Delhi will have an impact on the tourism prospects. “AirAsia had a critical role in bringing tourists to Malaysia. They are citing high airport charges. We are talking to other full service carriers for increased connectivity," he said.

Malaysia had 693,056 arrivals from India in 2011 compared with 140,000 arrivals in 2001. “This spectacular growth of over 400% in a short time span has ensured that India is one of top three source flight markets for tourists to Malaysia and is very rapidly closing the gap with the leader China," Noordin said.

“Qantas has decided to withdraw the SINBOM (Australia-Mumbai) service effective 6 May 2012. Whilst this is very disappointing, it has been made in the broader interests of the company," Gerard Lee, general manager of Qantas Airways, wrote in a 16 February note to travel agents.

Qantas Airways, in a statement on the same day, said the European debt crisis and weaker global growth forecasts have resulted in a significant deterioration in the aviation operating environment. Fuel prices remain high and the Qantas Group faces pressure from strong growth among rivals and cost disparity with competitors, in addition to the uncertain economic environment, it said.

Industry experts estimate there could be more consolidation of international flights that may result in at least a 10% increase in fares and a potential hit to the tourism industry.

Regi Philip, who runs Cosmos Agencies, a Mumbai-based travel agency, said big airline groups are contemplating to combine flights as the market is deteriorating and fares will go up by 10%. “Several foreign carriers are closing down their marketing offices. To be sure, the loads too are not satisfactory for anybody. Consolidation of flights may give them slight relief in terms of yield," said Philip.

After a year of assessing the escalated cost of the Delhi airport, the Airports Economic Regulatory Authority (Aera) recommended a more than four-fold increase in tariffs after its operator sought a nine-time jump. Airport fees for Mumbai are also likely to go up.

Representatives of Deutsche Lufthansa, Air France, British Airways Plc, Emirates and Singapore Airlines opposed the increase proposed by the regulator, according to the minutes of an Aera meeting posted on its website.

The rise in Delhi airport user fees will lead to an increase in fares and the cost of operations, Air France’s De Man, said in an email last month.

“Effectively, Delhi airport is already one of the most expensive airports in Asia and the additional cost to airlines and passengers will run into many millions of dollars," he said. “It may be expected that airlines may even cease their operations to Delhi due to these extreme cost factors. We strongly oppose this type of unrealistic and damaging increases, and appeal to the Indian authorities to put a halt to the same."

Kapil Kaul, chief executive officer, South Asia, Centre for Asia Pacific Aviation (Capa) said international airlines will continue to review their network strategy based on the profitability and these temporary disruptions are part of the market.

“These international airlines will return to India sooner or later as the market continues to be robust," Kaul added.

Tony Tyler, director general and chief executive officer at International Air Transport Association (IATA), said 2012 continues to be challenging for the airline industry. “If Europe cannot resolve its sovereign debt crisis and the continent falls into deep recession, the industry will most certainly fall into losses. Even if there is a European solution and we make $3.5 billion this year, it will not correct a very difficult record. In fact, since 2001 airlines will have lost $26 billion on revenues of $5.5 trillion. You cannot sustain a business or an industry that is all turnover with no leftover," Tyler said on 16 February at a media roundtable in Bangkok. IATA represents some 240 airlines comprising 84% of total air traffic.

Graphic by Yogesh Kumar/Mint