Home / Companies / Air Costa to consider IPO after budget carrier breaks even

New Delhi: Air Costa, India’s newest budget carrier, will consider an initial public offering (IPO) in three years time once it breaks even in the 12 months starting April.

“The airline will probably post a profit in the financial year beginning 1 April as it adds more destinations and keeps costs low," chairman Ramesh Lingamaneni said in an interview. “The carrier, based in Vijayawada in southern India, has been approached by investors and will decide on selling a stake after some time," he said, without providing a timeframe.

Air Costa, which has placed a $2.9-billion order to buy 50 Embraer SA regional jets, joins bigger rivals IndiGo, SpiceJet Ltd and Jet Airways India Ltd in wooing Indians to fly as economic growth spurs more people to shift from trains to planes. India’s local airline passengers may reach 107.2 million by 2016, making it the world’s fourth-largest domestic market, the International Air Transport Association predicts.

“There is a huge gap after Kingfisher Airlines and Paramount Airways stopped operations," Lingamaneni said at his office. “Once we saw the gap we decided to start."

In January, Airbus Group NV said it cancelled Kingfisher Airlines Ltd’s order for superjumbos, reducing chances for the resumption of services by the grounded Indian carrier.

Air Costa, which started flights in October, currently flies two planes to six destinations. It has two more aircraft awaiting approvals from the regulator to fly.

“The Indian low-cost carrier is one of the latest entrants in the Asia-Pacific region’s budget airline market, where some 10 new operators may join the 50 already operating," according to Brendan Sobie, chief analyst at CAPA Centre for Aviation in Singapore. “The spurt has also helped keep the region as the most promising market for travel growth, with a third of Airbus and Boeing Co. orders."

More destinations

“Air Costa will add three more destinations once its planes are allowed to fly," Lingamaneni said. The carrier is fully owned by the Vijaywada-based LEPL Projects Ltd, which operates businesses including real estate and renewable energy.

“The airline will focus on connecting small towns and cities, wooing passengers travelling in luxury buses and upper classes of trains," Lingamaneni said.

The aircraft ordered are from Embraer’s upgraded E2 lineup, with 25 of the E190 model and 25 of the E195. Air Costa also has options for 50 more jets.

Airlines in the Asia-Pacific region, including China, will take delivery of 1,500 new jets worth $70 billion in the 70- to 130-seat category over the next two decades, accounting for about a fifth of the global demand, Embraer has forecast. Bloomberg

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