TATA-SIA, the new airline expected to be launched next year, will surely be a game changer and will have a strategic impact on the aviation industry. However, the shockwaves resulting from the two Tata joint ventures (with Singapore Airlines and AirAsia Bhd), will be felt only from 2015-16.
The cost environment in Indian aviation continues to be very hostile and fares are still way below costs. For existing airlines, business conditions are tough and this will impact traffic till the two key elements—fuel and currency costs—stabilise. In the near term, costs might actually increase. Experts say aviation fuel is likely to remain firm. Currency impact will continue to be a challenge in the near term. The third key cost, airport fees will also remain high in India. I see continuing cost and revenue challenges for airlines at least, till the end of next financial year.
AirAsia India’s entry will directly increase competition and will lead to more pressure on fares on some routes. But the extent of fare-wars will depend entirely on AirAsia India’s network and scale of operations in India. At this time, there is still some uncertainty because of delays. We need more transparency in granting licences as this impacts investor sentiment.
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