Star Air set to take delivery of E175 plane as regional carrier scales up

The airline has contracted four E175s from lessor Nordic Aviation Capital. (Representative image- credit: @OfficialStarAir/Twitter)

As the first of the four Embraer E175 planes for Star Air takes off on its delivery flight to India, the airline is all set to create history.

There has hardly been a regional carrier that has grown in India. TruJet was one that sustained for the longest duration and was at the cusp of growth when it went down.

Star Air is now bucking that trend to become the first regional carrier to scale up. The airline has contracted four E175s from lessor Nordic Aviation Capital.

Star Air started operations in January 2019 and most of its life has been under the cloud of the pandemic. The airline currently operates five Embraer E145s, which are configured with 50 seats each.

What separates this airline from its peers of the past is probably silence. While Paramount Airways and Air Costa were in the news for many reasons, Star Air has hardly made news.

Surprising as it may sound, Bengaluru airport chose this small airline to be the first to move to Terminal 2, the new one dubbed the “Garden Terminal.”

What does this expansion mean for Star Air, apart from being the first regional carrier to scale up?

Exclusivity

Over 95 percent of Star Air’s routes are operated exclusively, with most of them under the RCS-UDAN, the government’s regional connectivity scheme. This has helped the airline get subsidy from the government and also price tickets higher for non-subsidised seats since there is no competition.

Data shows that the airline has consistently grown over the years, even during the pandemic, although its market share has remained flat at literally a fraction of the total market.

How would the E175 help the airline?

The E175s that Star Air is leasing from NAC were earlier operated by Belavia, the national airline of Belarus, and are configured with 76 seats, 12 of which are in business class. The aircraft left Belavia’s fleet in November after being at the receiving end of sanctions for the past couple of years.

It remains to be seen if Star Air upsells the business class seats as special seats with a fixed amount to upgrade, similar to what Akasa Air is doing, or decides to opt for a dual-class benefit. My take is that it would look to the former option to ensure simpler and leaner revenue management.

The E175 comes with an increase of 26 seats over the E145s. Routes that have matured, see high demand and are longer could be the first ones to be upgraded, which puts the focus on two of them: one to Hindon via Hubbali or Kalaburagi or to Jamnagar from Bengaluru and Hyderabad.

There are two ways of adding capacity on a route – deploying aircraft with more seats or increasing the frequency of flights. By adding frequency, one would simply double the capacity overnight, while deploying a higher capacity aircraft allows for a stepped-up increase, which helps with being closer to market reality.

Balance sheet still not black

Data presented in parliament shows that Star Air has lost considerable money in the past few years. The airline lost Rs 366 crore in FY20, Rs 187 crore in FY21, and Rs 226 crore in FY22. This even after most of its routes, if not all, are under the subsidised RCS-UDAN scheme. Until now, the airline has purchased its aircraft and has not leased them.

India is known to be a brutal aviation market. From Kingfisher Airlines and Jet Airways to Paramount, Air Costa, Air Pegasus, and Air Carnival, there are airline skeletons all around. In such a market, it is an achievement to keep flying for four years, including during the pandemic.

Future

What next from here? In November last year, Embraer flew its E195-E2, the biggest and latest generation aircraft into India. The aircraft flew to Kolhapur, the headquarters of the Sanjay Ghodawat Group, with Sanjay Ghodawat, the founder and head, onboard with Arjan Meijer, CEO of Embraer’s Commercial Aviation division.

Will Star Air consider another step up? It may, but not immediately. It will be interesting to see how the mix of 50-seater and 76-seater planes is used to manage demand and build enough demand to continue beyond the concession period of RCS-UDAN.