Be Indian, Fly Indian

Until recently, the state-owned Indian Airlines (IA) was saddled with several problems. Its marketshare in the domestic sector was dropping, private airlines were eating into its profits from both the domestic and international routes, fleet constraints were choking its expansion and the customers were slowly, but steadily, losing faith in the 52-year-old airline. But things are changing now.

To begin with, India's national carrier has decided to don a new look. This week, IA announced it has become "Indian"—a strange choice of name, you might say—and added vibrant colours to its planes. On the anvil is a long list of do's, which will initiate a new strategy to take on competition and "reassert its commanding position in the Indian aviation sector".

"IA needed to send a strong signal that we are ready to fight private and international players. This is the first step towards proving that we can do it," said aviation minister Praful Patel. Over the next 18 months, IA's, or now Indian's, entire fleet will have the new colours.

Ever since it lost its monopoly over the domestic skies, it has been losing market share to private airlines, who provided better services and redefined the flying experience in India. The advent of low-cost airlines like Air Deccan and SpiceJet only made the situation worse. In fact, in the past year, IA's marketshare dropped from 39 to 34 per cent. Its nearest, and probably the strongest, competitor, Jet Airways, which began operations in 1993, has managed to gain a share that's similar to IA's.

However, the IA management feels that the loss in marketshare was due to fleet constraints. And this will be corrected once it augments its fleet strength. At present, IA operates 47 planes, of which it owns 30 and the remaining 17 are on lease. Its subsidiary, Alliance Air, operates another 20. But this number will catapult once IA's fleet acquisition programme, cleared this September, takes off in 2006. Under this plan, it will acquire 43 more aircraft worth $2.2 billion. Of this, 20 will be A321s, 19 A319s and four A320s.

Apart from it, IA has already leased an additional five A319s, and the first one arrived last week. A few more A320s will be leased next year to increase its capacity. This is the first time since 1994 that IA is acquiring new planes and it'll help in phasing out its ageing fleet of Boeings which will be turned into freighters. The A300s, inducted in 1978, will also go. The money for the new aircraft will come either from its proposed ipo next year, or from credit facilities arranged by the plane manufacturers.

In a bid to protect its highly-profitable international routes, IA is also negotiating with aircraft makers to buy wide-bodied planes that can ply long-distance routes. The company received bids last week and the final agreement, say IA managers, will be finalised by early 2006. At present, IA flights to the Gulf, which account for about 12 per cent of its revenues, are under threat as domestic private airlines have been allowed to fly those routes too. Therefore, IA hopes to take advantage of trans-Atlantic routes to the US and Europe to make for a possible dent in its topline and bottomline. (Both US and European airlines are expanding the number of flights to Indian destinations.)

What about the service, which has always been IA's Achilles heel? All that is history, insist IA's managers. "We have beefed up the service and the change is visible. We have taken several initiatives to change the people's perception," says Sushma Chawla, CMD, IA. She adds that IA's food and services are comparable with any international airlines. IA also plans to introduce in-flight entertainment in its domestic flights which are missing even in its international flights now.

If everything goes as per the plan, the world's largest domestic airline (outside the US) may be in a position to regain its old stature. If it doesn't, IA may crashland due to 'management and policymakers error'.