New Delhi, March 21, 2005
Reuters
By Rina Chandran
The company's founders, Royal Holdings Services
Ltd., a Nevada-based company owned by NRI Kansagra
family, hold roughly 40 percent is hoping to lure
millions of frugal train travellers in the country
as it readies for take-off in a booming travel market.
Royal Airways Ltd., among the first privately-held
firms to enter the aviation sector in India, will
compete with local discount pioneer Air Deccan, besides
new entrants Air India Express from the state-owned
carrier and Kingfisher Airlines, backed by the country's
largest brewer, the UB Group.
But with the Indian air travel market expected to
grow at about 25-30 percent over the next five years
as incomes rise, the airline is confident there is
room for more players.
"There is potential to make domestic air travel
a much bigger market than it is now," said Mark
Winders, chief executive officer of Royal Airways,
who estimates there are 14 million air travellers
in a year, a tenth of the number in China.
"It can increase five to ten-fold over the next
few years."
Investor and consumer interest is strong in Asia's
fourth-largest economy, where the air travel market
has remained small due to steep fares inflated by
high fuel taxes and levies.
But stiff competition triggered a price war that
has expanded the air travel market. The government's
decision to raise the foreign investment cap in aviation
to 49 percent from 40 percent last year, and promises
to improve and privatise airports have also helped.
Shares in Royal have risen nearly 60 percent this
year.
SpiceJet, which plans to launch in May, hopes to
turn an operating profit by the end of the first half
of the first year of operations, and have a positive
cash flow by the end of the first year, said Winders.
Jet Airways Ltd., the largest domestic carrier, which
recently raised $435 million in an initial public
offering, has a 43 percent share of the market, also
served by state-owned Indian Airlines and privately-owned
Air Sahara.
But SpiceJet views its competition differently.
"Our competition is trains and 'couches' --
people who stay at home and don't travel otherwise.
We want to get those Indians flying who have not flown
before," said Winders, who had helped launch
Canadian budget carrier CanJet Airlines.
"We want to be the Jet of the low-cost carriers."
Royal, which discontinued operations of airline ModiLuft
in 1996, tried to relaunch in 2001, but was affected
by an industry-wide slowdown in the aftermath of the
Sept. 11 attacks in the United States. MudiLuft was
a joint venture with German airline Lufthansa.
SpiceJet will take off with three leased Boeing
737-800s, and take delivery of the first of the 10
737-800s it has bought early next year. It has an
option to buy 10 more.
"Air Deccan's done a good job of bringing the
concept of budget airlines to India, but we feel we
can still improve on quality and customer service,"
said Winders.
The company's founders, Royal Holdings Services Ltd.,
a Nevada-based company owned by the non-resident Indian
Kansagra family, hold roughly 40 percent of the airline.
Domestic and foreign institutions hold another 20
percent.
The company, which will soon be renamed SpiceJet
Ltd., may float a second share issue if it needs more
funds, said Winders.
"World over, successful low-cost carriers have
challenged the dominance of legacy carriers, we could
do that here," he said.
"It could be like the cellphone market: lowering
the price created a huge demand in India ... we think
lowering fares will do the same for the air travel
market here." ( Reuters)
