Air India Express looks beyond oil price slump-hit Gulf, flies in 10-year plan

Looking to move beyond its dependence on Gulf traffic, which is under strain in due to drop is oil business, national carrier Air India's international low-cost subsidiary Air India Express (AIE) is drafting a 10-year-old plan for its future expansion and eyeing new routes.

"We are in the process of drafting Mission 2026 plan which will be our roadmap for the decade ahead," Air India Express chief executive officer K Shyamsunder told DNA Money. The plan would be prepared by a consortium led by consultant KPMG and the project report is expected in six months.

The Kochi-headquartered AIE with a fleet of 23 Boeing 737-800 planes, flies to major international destinations within a distance of around four hours from India. It flies to 13 international destinations, mostly in Gulf.

To cut dependence on Gulf, the airline plans to increase reach to Southeast Asia, where it operates to just two destinations now – Singapore and Kuala Lumpur. It is also planning to connect Tehran by next year, which will be the first by an Indian airline after Air India in 1993-94 discontinued flights after economic sanctions on the country.

According to analysts, one of the main reasons for AIE's to expand to other destinations is slowing down of Gulf traffic on account of fall in oil business there. "All airlines operating on these routes will be affected if things don't improve in Gulf region," said Shyamsunder at an event in Mumbai.

Aviation industry experts said since its launch in 2004, AIE had been trying to establish its own identity away from its parent. "After the mess created by the merger of Air India and Indian Airlines and the subsequent losses, AIE too began to flounder due to labour and other operating issues," said a senior executive from the airline. "At one point of time, the vendors and others put us on cash and carry, even though we were a separate company operating independently of Air India. It's only after a lot of efforts from the government that things began to get better, and we began to get recognised as a different company," said the executive.

Further, only after the AIE management insisted that all dealings with its parent and sister concerns should be treated as a commercial deal and therefore payment needed to be made, things got still better.

"The Companies Act helped us. Later even the management backed us on that, though we do maintain synergies and don't operate on each other's routes. Recently, we have even signed code-shares with Air India for several routes," said another source.

AIE clocked revenues of Rs 1,897 crore during the first six months of this fiscal, of which Rs 415 crore was net profit. Air India, on the other hand, earned operating profit of Rs 105 crore during 2016 fiscal.

Devesh Agarwal, a Bengaluru-based aviation analyst said, "AIE is a reasonably efficiently run airline. The further, it moves away from Air India and government, better it will be for it. The airline definitely has to start looking beyond Gulf and Kerala."