Saturday, January 21, 2006

Competition pains

A note outside the above subject about Mysore Airport: Nothings happening on this front. The State Government is supposed to have completed the handover of additional land to the AAI this month. AAI was to then call for tenders for the various works. With the Karnataka State Government now bereft of ministers and tottering on the brink of a collapse, I foresee another delay. Mysore Airport has been jinxed from a long time, though successive Governments have been assuring the citizens that an Airport ison the cards. Our docile citizens have been duped as usual. Watch this space for updates on this issue.

Now let me deal with the subject at hand and the competition pains that some of the Airlines are facing due to the take over of Sahara Airlines by Jet Airways. I urge my readers to go through my previous article regarding M&A Jet Sahara. Now, the other contender for the Sahara buyout, Kingfisher, is crying foul of this takeover. They are now trying a loose alliance of sorts to "counter" the biggest Airline in India. The group of four includes, as mentioned in the news, Go Airways (promoted by Jeh Wadia), SpiceJet (erstwhile Modiluft, Royal Airways etc), IndiGo (not yet started operations) and Air Deccan. Air Deccan however, has opted out of the "alliance". The alliance has mentioned that MRTP should investigate the takeover while the MRTP has already said that there is no threat of a monopoly when so many Airlines are currently flying and more are to arrive on the scene.

The alliance, as I shall call the group mentioned above, is not going to be effective in countering Jet Airways. What they are trying to do, in my opinion, is to consolidate amongst themselves with the view of sharing sectors, spares, ground support equipment, slots (perhaps), pool personnel for handling and so on. Such a consolidation has already been predicted by me in my first article titled "2005 Year End Aviation Review" posted last December.

The operators coming in are also going to create more competition and that’s the name of the game. Will there be passengers for all the Airlines on the sectors they fly? Absolutely not and that brings me to the other article I wrote called "Wake up Airline investors in India". If the new entrants come in on the same sectors that Jet, Indian and the alliance members are flying, there are going to be plenty of Airlines going bust. Investors beware; some of these chaps are going to go public to raise funds. This has happened before with Vif, NEPC, East West Airlines, Damania Airways etc. You don't want your shares to plummet to 10 paisa per share value when some of these chaps close shop and disappear, do you?

I suspect that some members of the "alliance" are on shaky ground and that’s why they fear competition. Some of them will have to merge, be bought out and may even close. The way to face big guys such as Jet Airways, Indian and so on is to consolidate, expand, plan, market and deliver quality service. I still feel that, if not for the appalling infrastructure at our Airports, there's still plenty of potential for more serious operators.

3 comments:

Blog-Capt. Anup Murthy said...

An addition to what I wrote in the first paragraph: As of today, 9th Feb 2006, Star of Mysore carries a news item mentioning that due to land acquisition delay, the project concerning the Mysore Airport is likely to be delayed. I had predicted delays in my first paragraph. The MP from Mysore Mr. vijayshankar is to meet with the Mysore Deputy Commissioner and the KIADB officals on the 13th of this month to discuss this issue. Wait and watch this space.

Nikhil said...

Golly! will the mysore project ever take off? Capt. Murthy, are you involved with the mysore airport project in anyway?

Blog-Capt. Anup Murthy said...

I am not involved with the Mysore Airport project, Nikhil. There seems to be a problem with the last 20 acres of land to be acquired. I don't see why that is delaying the project unless this piece of additional land is going to be an obstruction to the re-aligned runway. I am planning to meet the DC Mysore, after their internal meeting, sometime next week. I hope to have better news by then. I am willing and able to help out in any way with the airport project. if the airport project is a go, I'd be willing to bring in some sort of a air service. Watch this space!