Richard Branson Talks About Indian Airline Business

Tuesday, 30th October 2012 at 01:05am

While Virgin Atlantic Airways will soon resume its Mumbai-London service after a three-year hiatus following the improvement of passenger traffic between the subcontinent and UK and USA sectors. Its owner, Sir Richard Branson, is not yet keen on launching a local airline in India, considering the country's ailing local aviation industry.

To recall, Branson made a disclosure in 2007 that he might put up a domestic carrier in the country to compete head-on with Jet and Kingfisher. But due to economic reasons, the planned was never materialized. His Virgin Atlantic even stopped flying to Mumbai from London in 2009 and its London-Delhi service was almost on the chopping block as well.

The English business magnate also clarified that he has no plans yet expanding into India. In his most recent interview on CNBC-TV 18 by Shereen Bhan, he said that India's current laws don't seem to give him reasons to invest in the country.

He cited the overcapacity of India's airline industry which caused the recent problem. One or two airlines should go, in order to see a profit.

Meanwhile the new Mumbai-London service by Virgin Atlantic makes it more convenient for passengers from Mumbai to London to fly onwards to the US East Coast, specifically to Boston, Miami, New York and Washington as the stopover between flights is only 2 hours.

Based on a revised law, foreign companies are now allowed to own up to 49% stake in a local airline. But Branson is still cautious saying that it's not yet the right time to plunge into India's aviation business. The industry is still in the mess and everybody is struggling.

According to consultancy firm, Centre for Asia Pacific Aviation (CAPA), the combined total loss of all Indian carriers during the second quarter of the present fiscal stands at $470-550 million.

Most of the country's carriers don't have encouraging balance sheets right now. So it is up to foreign carriers to take the risk, whether or not, to pour their investments onto the local airline at the moment.

Many believe that the country's aviation industry doesn't offer a favorable environment for foreign investors despite the recent easing of FDI laws. Who wants to invest in an ailing industry, in the first place?

Another thing that might have discouraged companies to invest in the local aviation industry is the fact that most of the international carriers operating in the country are also struggling to make a profit.

One more thing that has foreign airlines discouraged in owning a stake in a local airline, is the prospect of allocating most of the funds to old dues and other unpaid financial obligations.

Lastly, but certainly not the least, is that the aviation fuel in India is way too pricey which could mean less attractive for foreign airlines to operate a local entity.

By: Pete Lee.