‘Airline costs are 40% higher in India’

Air Arabia, one of the largest low-cost carriers in the Middle East, operates in 13 cities in India. Adel Ali, Group CEO, Air Arabia, in a media interaction, spoke about the challenges and potential of the Indian market.

How much does the Indian market contribute to Air Arabia in terms of passengers and revenues?
It is 10-12% for both passengers and revenues.

How has growth been so far in India?
We had good year-on-year growth until about 2010. But in the last two years we have not grown at all because we have used all our allocated capacity under bilateral and the seat factors have been high.

Is there a room for expansion if you have used the allocated capacity?
I think there is a room for expansion. For governments, it is a routine thing that they need to do every year or every two years. And one remains hopeful that both parties are sensible and they recognise the potential. It will be a gradual process. In a business you always want to grow. We aim for more because there is a demand for it and I am optimistic that if the talks happen, things will be positive.

What are your investment plans in India post the opening of FDI?
There are lots of good airlines in the country. We have as of today not made any move or thought of any decision about investing in an airline in India.

What is the reason?
Until about a few weeks back the law did not allow you do to do so. Now that the law has changed, one needs to look at the framework of that law and need to understand what exactly its offering and what are the implications and the benefits. Once that is understood, I am sure all the airlines which are interested will look at what opportunities exist and what is the potential of the business, and some may do it and some may not.

How do you see Indian markets in terms of cost?
It is high. Fuel prices are high, airport charges are high. There are quite a lot of additional charges that airline has to pay. In comparison, you pay at least 40% more in India.

But you are still looking at entering more cities in India..
Any airline will go to a country which has big population. But what we also need to understand that it is a two-way market. China alone has not succeeded, it’s always a two-way success story. Each market has got two angles.

How profitable are your Indian routes?
Our profitability generally works on a methodology of how much a route contributes to the overall business. So all the 80 airports that we operate in have different levels of contributions and that has made us profitable for last nine years and we hope to continue this way; of course there are ups and downs, but so far it has worked for us.