MC Exclusive | Alliance Air plans to connect Bharat with neighbouring countries

State-owned Alliance Air plans to connect regional hubs to neighbouring countries, the airline’s chief executive Vineet Sood told moneycontrol.com.

Accordingly, the divestment bound regional player plans to expand its network to neighboring countries such as Sri Lanka, Nepal, Bangladesh and Myanmar.

“Our key focus would be to connect Regional India to these countries,” he said without divulging any other flight details or timelines.

In the pre-Covid era, Alliance Air operated to Jaffna in Sri Lanka.

Regional penetration

Currently, India’s only state-owned carrier connects destinations within the country. Alliance Air operates to 55 destinations across India mainly in Tier II and III cities.

The airline is also engaged in developing new markets in Tier-II and III cities.

“We have plans to further expand our connectivity in North-East India, with a key focus on ALGs (Advance Landing Ground) for Arunachal Pradesh connectivity through our Dornier Do-228,” said Sood.

Recently, Alliance Air started flight operations in Ziro (Arunachal Pradesh), which is an ALG airport.

“In Northern and Central India, we have been regularly adding new flights, whereby our enhanced focus in the near future would be to introduce high-terrain routes in North India with our newly inducted ATR42-600.”

Fleet augmentation

Currently, the airline has a fleet of 18 ATR72-600 aircraft and one Made-in-India Dornier Do-228.

Alliance Air plans to induct its second Dornier aircraft soon.

“We recently inducted two ATR42-600 aircraft, which are capable of operating on the short runways in Shimla, Kullu and other airports located at high altitudes,” he said.

More stable ATF pricing policy sought 

According to Sood, high fuel prices contribute to a major portion of the operating cost of any airline.

In India, domestic ATF prices are far higher than international benchmarks due to the high levels of state-level taxation.

However, many state governments have reduced the VAT on fuel to cushion the blow from higher prices.

Notably, fuel-based expenses account for around 40-45 per cent of the overall operating cost of airlines in India.

Besides, the depreciation of the rupee against the US dollar has been reflected in these prices.

The industry has been demanding that the fuel type be either brought under the ambit of GST or a new pricing mechanism be instituted.

“The financial impact can be especially acute for airlines when it relates to sizeable changes in the value of the US dollar. This is because a large proportion of airline costs (including fuel) are denominated in US dollars, and many carriers need to convert domestic currency into dollars each year to meet their obligations,” he said.

“A more stable pricing will allow us to operate more profitably.”

Inflation and competition challenges 

“Though (ticket) pricing of any airline is dynamic in nature and transforms based on various factors such as demand and seasonality, we also feel more than ticket prices, accessibility and travel time is important,” said Sood.

In terms of competition from rivals, he said new players in the sector would only accelerate the growth of trade and tourism.

Furthermore, he pointed out that the civil aviation industry has emerged as one of the fastest growing industries in the country over the last three years.

“All airlines have kept the price bar almost equivalent… The most important factor in the near future is how each of us (airlines) attracts passengers.”

“Majorly, passengers look for comfort and affordability. I believe these will be important factors to sustain in the aviation sector in the near future.”

Financials

The airline, like its peers, has been heavily battered by the Covid-19 pandemic.

On March 31, in a written reply to a broader question in the Lok Sabha, Civil Aviation Minister Jyotiraditya Scindia said Alliance Air is estimated to have suffered a loss of Rs 440 crore in 2020-21 and Rs 315 crore in 2021-22 (till December 2021).

In its financial report for 2020-21, the airline had cited the impact of the Covid-19 pandemic and its subsequently truncated operations as key reasons for the losses.