Air Arabia Says It’s Not In The Fray For Air India

Sharjah-based Air Arabia is interested in Air India Express, but that’s not on offer.

An Air India jet taxis on the runway at London’s Heathrow International Airport. (Photographer: Suzanne Plunkett/Bloomberg News)
An Air India jet taxis on the runway at London’s Heathrow International Airport. (Photographer: Suzanne Plunkett/Bloomberg News)

Budget carrier Air Arabia PJSC is not in the race for Air India as the government does not plan to divest Air India Express separately, Adel Abdullah Ali, board member and group chief executive officer at the Sharjah-based airline, told BloombergQuint in an interview.

The government of India’s announcement [is] that Air India is on offer but Air India Express will be retained by the government. Ours is a low-cost business model and Air India is a conventional airline, so the two business models are very very different. This is why it doesn’t fit.
Adel Abdullah Ali, Group CEO, Air Arabia

The core airline business comprising Air India and Air India Express—the low-cost overseas arm—will be offered as one company, and the process will be completed by the end of 2018, Bloomberg reported quoting Jayant Sinha, minister of state for civil aviation. The government will also sell separately its regional arm, ground handling, and engineering operations in the same process.

The net loss of the state-owned airline widened to Rs 5,765.16 crore in 2016-17. The divestment-bound national carrier reported an operating profit of Rs 105 crore in 2015-16.

The previous UPA government in 2012 had approved a turnaround plan under which Air India is to receive a total equity infusion worth Rs 30,231 crore up to 2021, subject to meeting performance thresholds.

Of this, Rs 26,545 crore has already been infused into the airline till now. Air India has taken measures like rationalising routes and enhancing aircraft utilisation to cut costs. Its total loans amounted to Rs 48,447 crore in 2016-17. This includes aircraft and working capital loans of Rs 17,360 crore and Rs 31,088 crore, respectively.

Delay In Increasing Bilateral

The number of seats under the bilateral Air Service Agreement between India and the U.A.E. is around 1.3 lakh a week. The seats are allocated between Dubai, Abu Dhabi, Sharjah and Ras-al Khaimah. Dubai and Abu Dhabi together account for nearly 85 percent of the bilateral seats agreed upon between the two countries.

The Sharjah-based airline flies 112 flights every week to 13 Indian cities, but its growth has stagnated in the last five years due to delay in increasing bilaterals. The seat utilisation between India and Sharjah has crossed 85 percent of the weekly seats allotted. The new National Civil Aviation Policy, 2016 allows negotiation of bilaterals if the seat utilisation crosses 80 percent.

“As an airline, we are not involved with seat allocations. It’s normally between governments. I know both the U.A.E. and Indian governments have been talking for some time,” said Abdullah Ali. As soon as more seats are allotted, Air Arabia will be happy to increase its services in India, he said.

Air Arabia is currently serving 140 airports between East and West and Africa. Expansion into Morocco saw it double the size of airline in the last two years. It has started connecting 40 airports in Europe to Morocco and North Africa. But its India strategy doesn’t involve accessing connecting traffic.

Our interest is more to link people to a city first. With the seats we have, we’d rather promote business between India and the U.A.E and not worry about connectivity. There are other global airlines that come to India that have connecting flights.
Adel Abdullah Ali, Group CEO, Air Arabia