by Vinay Bhaskara
Earlier this month, erstwhile Indian national carrier Air India placed a tender asking for fuel supply contracts at 9 different stations as seen below. The tender includes Sydney, where Air India is
planning to launch 4 weekly nonstop and 3 weekly one-stop flights (in a triangle routing with Melbourne) on-board the carrier's new Boeing 787 Dreamliner. Australian services are scheduled to commence August 29th as of press time.
As the document states, just because the destinations are mentioned in this fuel tender, it does not necessarily mean that they will in fact be operated. The airline business is transitory, and airline plans are rapidly changing. That being said, if we take this document at face value, it represents a major international expansion, both for Air India's under-utilized fleet of Boeing 777-200LRs (5 are currently being shopped) and Boeing 777-300ERs, as well as for the 27 787 Dreamliners on order.
Sydney is already a known quantity, but Jakarta is an interesting destination. Indonesia and India recently revised their bilateral air service agreement (ASA) in 2011 to allow carriers from either side to operate up to 28 flights per week with aircraft of size up to a Boeing 747-400. Indonesian carriers are allowed to serve Mumbai, Delhi, Kolkata, and Chennai, while Indian carriers are allowed to serve Jakarta, Medan, Bali, and Surabaya. Garuda Indonesia was reportedly planing on serving Jakarta - Mumbai/Delhi with 737-800 aircraft but those plans never materialized. The largest Indian population in Indonesia is actually on the island of Sumantra, and India-Medan demand is under-served. Even so, Air India would have the first mover's advantage on connecting these two burgeoning regional powers.
The addition of Nairobi on this list raises an interesting question - the biggest demand center from Nairobi is with India's commercial hub in Mumbai thanks to historical ties of Indian expats to Africa and the type of business traffic on the route. However, Air India looks committed to building a proper connecting hub in Delhi, where there is some demand to Nairobi, but low yields and existing competition in the form of SkyTeam member Kenya Airways. It will be interesting to see where Air India chooses to route its Nairobi services from. Perhaps a nonstop Nairobi-Mumbai service that continues on to Delhi could work; as the 787 is the right aircraft for the job but all of the 787s are currently based in Delhi.
The European centers vary in feasibility - Milan and Rome both have strong O&D demand - and Milan in particular has a large North Indian community with more than 76,000 annual passengers (in each direction) demand to Delhi. Rome is a more tourist-oriented destination but it too has a strong VFR (visiting family relatives) traffic component. Delhi-Milan was previously tried by Jet Airways with an A330-200, but Air India is stronger in Delhi than Jet Airways is, and the 787 has a better cost profile for the route than Jet Airways A330s.
Zurich is a premium destination with growing Indian tourist demand to Switzerland. But there isn't the volume required to sustain nonstop services for Air India - the premium segment of the market is already dominated by Swiss. However, the size of the fuel contract indicates that Air India will be likely serving Zurich as a tag-on to one of the other European destinations - likely Rome or Milan.
Moscow has strong demand thanks to growing business ties but will face strong competition from Aeroflot's existing flights to Sheremetyevo. Madrid is an odd one. There are no significant business or leisure ties between Indian and Span, and with Spain in the midst of debilitating recession, demand is not set to grow any time soon.
San Francisco is another interesting case. Air India is the only Indian carrier with the aircraft required to launch San Francisco nonstop from Delhi (a flight of 7706 miles) - the Boeing 777-200LR and the Boeing 777-300ER (Jet Airways' configuration of the 777-300ER is too heavy to do so) - however, the size of the fuel tender involved implies that San Francisco will be served as a one-stop destination; likely via Milan given the inflated size of the tender in Milan. Delhi-San Francisco is a large market, with 159,520 annual O&D passengers, but yields are extremely low. Meanwhile, Bangalore-San Francisco is a much higher yielding market with still 70,802 passengers of annual demand in 2011 alone (has likely crossed the 85,000 mark given the boom in Silicon Valley). Bangalore-San Francisco is doable on Air India's 777-200LRs.
Regardless, the expansion from Air India is interesting to behold. These routes will likely not return Air India to profitability given the massive debt. But on an operational basis; a few of them could be sustainable and break even.
