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NRI, founder Royal Airways to target train
travellers in India

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)

 

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