Fifteen years after founding a ground handling company, the demise of Air Deccan prompted Indian entrepreneur Shyson Thomas to take to the skies to capture some of India’s booming domestic passenger market.
The potential of the domestic Indian aviation market is in the numbers. India is a developing economy with enormous growth potential for aviation. On average, people in the US travel by plane domestically about 1.8 times per year. In India, the average is 0.1 trips per year. Put another way, one trip by air every 10 years.
If India’s 1.17 billion people travelled at the same frequency as do Americans, a market of 2.1 billion travellers would be created. But even if they only travelled one-third as much, India would have an air travel market of about 700 million – rivalling that of the US.
These figures were revealed in a speech in the country by IATA Director General Tony Tyler on Indian Aviation Day 2012.
Mumbai and Delhi airports still rule the domestic Indian aviation market. The two airports handle about 600 of the 1,600 domestic departures within India with 50-55 flights a day. With the expansion of airlines’ operations to tier-2 and tier-3 cities in India, the entire country is now connected on an extensive flight network.
It is this market potential that tempted Shyson Thomas, founder and managing director of Decor Aviation, an airport ground handling company based in Bangalore, to take the next step and launch his own airline, Air Pegasus.
IATA has called for the development of a comprehensive policy for aviation aligned with the Indian Government’s stated intention to make it easier to do business in India. The objective is to allow India to derive maximum social and economic benefits from its aviation market growth. Currently the ninth-largest aviation market, India will see about 280 million passengers by 2029, by which time it would be the world’s third-largest aviation market, behind China and the US.
Thomas explains his confidence in launching his airline: “Air Pegasus is a regional airline providing 13 daily flights connecting south India to south India. In that sense, we are fully confined to southern India airports. We do not want to compete with our big brothers, such as IndiGo, Jet Airways and SpiceJet in the crowded airports such as Delhi, Mumbai and Kolkata. The current scenario in India is everybody is competing in long-haul, crowded airports, with meagre or no yields.”
The ground handler, which operates at 13 stations in India, is separate from the airline, with no cross-over of staff. Decor Aviation has around 800 employees while Air Pegasus has around 300 employees. Thomas says: “We have taken on all required staff in the airline, including key personnel. We are not mixing handling staff with airline staff. Both are separate entities.”
Decor Aviation, founded in 1988, offers services such as aircraft servicing and maintenance, passenger handling and facilitation services, fuelling, baggage handling, ramp handling services and station management and representation for foreign airlines. It is a neutral handler, handling Air Pegasus as well as competitor airlines. Air Pegasus will only be handled by Decor Aviation.
Thomas has taken advantage of transfer pricing opportunities between the two companies in the Decor Group. He says: “This is a case of a backward and forward integration for the airline. The ground handler gets assured business from the airline, and on a similar note the airline gets quality, prompt handling services from Decor Aviation. There will be a cheaper rate available and longer credit.”
For two decades as a handler, Thomas saw at first hand the best and worst practices of airline operations, invaluable industry intelligence that he leveraged when setting up Air Pegasus. In particular, he has been able to avoid the pitfalls of establishing and running an airline in an emerging market.
In the last decade, multi-million dollar investments and some very flamboyant characters have been attracted to starting airlines in India, ultimately crashing and burning in bankruptcy. Thomas noted the faults and fate of two headline entrants: Air Deccan and Kingfisher Airlines.
He says: “Air Deccan basically had a short-term vision of increasing its company’s value and selling it off to someone. Air Deccan, though it became very popular, was never a successful airline. Finally, they managed to sell the airline to Kingfisher, which was a different model altogether.
“Kingfisher was in fact a ‘mis-marriage’ of a low-cost airline with a full-service, luxurious, flamboyant airline. The lesson to learn from Kingfisher’s demise is that Vijay Mallya could not make any money out of the airline while its executives all made lots of money, because of a lack of control and monitoring.”
Air Pegasus has been started with two ATR 72-500 aircraft, with ambitions to have some 20 aircraft by 2020. In October, the carrier leased three further aircraft from Vietnam Airlines to add to the initial pair. The choice of the Franco-Italian aircraft that offers no belly cargo capacity is deliberate, notes Thomas.
He says: “We have chosen the ATR 72-500 as the best suited aircraft for regional operations. In India, we have many city pairs with an average distance of 500 to 600km from one airport to another airport. This is why we have given greater emphasis to carrying more passengers than taking cargo on board.”
The airline currently connects Bengaluru International airport (BLR), Bangalore with Hubli airport (HBX), Hubli; Madurai airport (IXM), Madurai; Chennai International airport (MAA), Chennai; Mangalore International airport (IXE), Mangalore; Trivandrum International airport (TRV); and Cuddapah airport (CDP), Cuddapah. BLR-TRV-BLR is served twice daily as is BLR-HBX-BLR. Daily flights connect BLR-IXM-MAA and MAA-IXM-BLR, BLR-IXE-BLR, BLR-CDP-BLR, BLR-MAA-BLR.
Moving into a new sector has brought Thomas new personnel issues. He has had to recruit cabin and flight deck personnel for the first time. He says: “There is no dearth of First Officers and flight attendants in India at present. However, there is a shortage of ATR captains in India right now.”