Will 'Air Kerala' plan hurt Air India Express?

The Kerala Government's plan to begin 'Air Kerala' could be a precursor for more such state specific airlines but it sure to hurt Air India's prospects.

A story in today's Business Standard newspaper says that the state Government has revived the plan to launch 'Air Kerala' to counter a spurt in air fares on the Gulf routes during Ramazan and Onam festivals. It also quotes aviation experts to say that this move would hurt Air India Express (low cost arm of AI, which is headquartered in Cochi) which earns nearly 60 percent of its revenue from Kerala.


But the core of the issue-which led to the show of much bravado by the state Government and Members of Parliament from Kerala-lies somewhere else. According to a senior official in the Ministry of Civil Aviation, no formal proposal for beginning an airline from Kerala has come to the ministry till now.

As per current policy, any new airline must seek a Scheduled Operator Permit (SOP) from aviation regulator DGCA after satisfying laid down conditions on financial stability, fleet requirement etc.

Also, this official pointed out that despite Air India's best efforts, additional flights (which had been promised earlier) could not be started from Kerala under AI Express because of exigencies of impending Haj operations. This led to more flight cancellations than usual, upsetting Keralites.

It seems AI had finalised a contract to take 9 aircraft on wet lease from a Saudi Arabian lessor but the Government of that country suddenly black listed the lessor, thereby thwarting AI's leasing plans. These planes were needed to begin Haj operations from October 17, by which date AI had already promised to increase flights from Kerala to 116 per week.

With sudden cancellation of the leasing of 9 aircraft, AI had no option but to withdraw two aircraft from AI Express to deploy them for Haj operations and this led to much heartburn among Kerala travellers. "We are now trying our best to quickly lease two additional aircraft from another lessor and fulfill the gap. But obviously, we could not have stopped Haj operations to fly AI Express schedule.

The state Government's plan to begin an airline has no sanction of the Ministry as of now," the official quoted earlier said. He also denied reports that the state Government had offered to acquired AI Express. This official said Air India Express currently flies 78 weekly flights and even after the withdrawal of the two aircraft, will get 102 weekly flights from October 17.

Last week, chief minister Oommen Chandy announced launch of Air Kerala to link the state with Gulf countries. A story in the The Hindu says that the proposed airline would have initial capital of Rs 200 and its stakeholders would be the State government, Cochin International Airport. and public sector undertakings who will together hold 26 percent. The public will hold the rest, with non-resident Keralites expected to take a major share.

The airline will have Rs 10,000 as the minimum investment to become a shareholder. The story quoted Yousuf Ali, a board member of the proposed airline saying that there was already an offer to invest Rs 100 crore in the venture.

Updated Date: Dec 20, 2014 12:13 PM

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