Air Travel Comes To India's Masses

Lots of discount carriers are springing up in India, roiling the industry

Amid the crowd of passengers and well-wishers on the sun-baked tarmac at Bangalore's airport, a tall man in an open-necked white shirt stands out. Captain G.R. Gopinath, the founder of Air Deccan, India's pioneering discount airline, is overseeing the carrier's first long-haul flight, from Bangalore to New Delhi. The 11 a.m. flight is sold out with 180 passengers, who paid an average of $100 a ticket -- half what other carriers charge. Ravinder Bakshi, who usually travels by train, is delighted as he settles into his black leather seat. "At such low fares, I'll definitely fly again," he says.

Soon Bakshi and other travelers will have a lot more cheap seats to choose from. By next summer nearly a dozen cut-rate carriers are expected to ply the skies over India. Why the surge of interest? The success of discounters such as Malaysia's Air Asia has caught the eye of investors seeking to profit from growing demand for transportation in India. "The entry of discount airlines will open up the bottom of the market in India," says Kapil Kaul, a consultant with the Sydney-based Centre for Asia Pacific Aviation.

Indian air travel is in for a serious shakeup. Today, Air Deccan alone carries the no-frills banner in competition with four full-fare airlines, which together make just 400 daily flights. By next year, that figure will rise to 600 as discounters invest some $1.2 billion in the sector. With prices as low as 30% of current fares -- often as cheap as a train ticket -- the newbies could boost India's annual air traffic by 30%, to 20 million passengers, within a year, Kaul says.


Gopinath plans to play a big role in that increase. The 52-year-old former Army captain, who also runs an air charter service, dreams of the day "when every Indian can fly." Despite an inauspicious launch a year ago -- on Air Deccan's inaugural flight the engine caught fire before the plane even took to the air -- the company is starting to soar. Air Deccan now offers 54 daily flights to 19 cities. By March, Gopinath hopes to offer 100 flights a day to 65 cities. "We have 1 billion hungry consumers in India," he says.

Others are just as keen to get India's millions airborne. Flamboyant liquor king Vijay Mallya in January plans to launch a low-cost carrier, named after his Kingfisher beer, with $20 million in financing from GE Capital Aviation Services (GE ). Following closely will be Go, promoted by textile scion Jehangir Wadia. And charter carrier Jagson Airlines plans to expand as a regional discounter next year.

All this activity has spurred India's state-sector airlines to jump into the discount fray. Air-India plans to launch Air-India Express, which will take over routes to the Middle East, where some 4 million Indians hold service jobs. Indian Airlines, meanwhile, is planning to turn money-losing affiliate Alliance Air into a cut-rate carrier.

The new players face some serious hurdles. The biggest: infrastructure. Indian airports are dismal -- when cities are lucky enough to have one. Even cities with millions of inhabitants -- such as Dehra Dun, the capital of the new northern state of Uttaranchal -- have no commercial airport. The new government, though, has pledged improvements. On his first day in office in May, Aviation Minister Praful Patel announced he would spend $20 million to expand the Bombay and New Delhi airports and the next day approved a new private facility in Bangalore. "We'll completely revamp these airports," Patel promises.

Of course, not all the discounters will be successful -- or even take off. Munesh Khanna, director for India at Paris-based investment bank N.M. Rothschild & Sons Ltd., which is helping raise funds for Air Deccan's expansion, says the infrastructure pressures are enormous and expects only four or five of the newcomers to survive. Even that, though, would likely benefit traveling Indians.

By Manjeet Kripalani in Bombay, with Josey Puliyenthuruthel in Bangalore

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