With a population of close to 1 billion people, most of whom travel by train, India offers immense potential for air transport.
That potential was unlocked with the Indian Government's liberalisation of the domestic civil aviation industry in 1990.
One of the first to take advantage of the new conditions was Jet Airways, which in just seven years has become India's largest private airline. Since its launch in 1993, the carrier has expanded its fleet from two Boeing 737-300s to 30 aircraft. Load factors are consistently in the high 60% or low 70% area and growth seems set to continue - albeit more steadily as it settles down to a period of consolidation.
Liberalisation opened the way to foreign airlines holding a maximum of 40% in new startups, and Jet Airways was launched with backing from Gulf Air and Kuwait Airways, each of which took a 20% stake. In 1997, however, the government had a sudden reversal of policy and barred foreign airlines from holding any stake, forcing the two to withdraw and leaving the airline to go it alone. Jet Airways chairman Naresh Goyal subsequently bought the equity owned by the two Gulf state carriers.
Of the five airlines that started trunk operations in 1992/3, only two are left - Jet Airways and the smaller Sahara Airlines. Both will now benefit from the forthcoming new civil aviation act, which promises further encouragement of private sector airline operations in India.
"We are now the single most important force shaping the way aviation develops in this country," claims executive director Saroj Datta. He points to Jet Airways' policy of setting the standard for the highest possible quality of service, which he says "did not exist in India before we came along".
Giving passengers an inflight experience they will remember - and want to repeat - is at the core of how the airline does business. Its mission statement says: "Jet Airways is going to upgrade the concept of domestic airline travel to that of a world-class airline." The airline is efficient - its staff of 5,000 is proportionally more productive than state-owned Indian Airlines, which operates 61 aircraft with 21,000 employees.
Rated one of the top 30 companies in India, the carrier, wholly owned by Tailwinds, a non-resident Indian company based in the UK's Isle of Man, is demonstrating that it is also in the business of making money.
Sales have grown steadily from $43.2 million in the first year of operations and a market share of just 6.6% to a projected $457 million in 1999-2000 and a share of more than 35%. Revenue passenger kilometres have followed the same path, increasing from $530 million at the beginning to $4 billion today.
Goyal, who in addition to chairing Jet is Tailwinds' sole shareholder, chairman and the driving force behind Jet, is the first to acknowledge that such expansion cannot go on forever. He foresees a "few years of consolidation" now the carrier is firmly established in the domestic market, although numerous destinations are being considered as part of its strategy of providing "total coverage of India". This is no small task in a country where rail accounts for most journeys. Goyal is in no doubt, however, about the "tremendous potential" for the growth of domestic civil aviation in India.
Jet Airways operates over 175 daily flights to 36 destinations, with Mumbai, formerly known as Bombay, serving as its primary hub and maintenance base. New Delhi, Calcutta and Chennai (which used to be called Madras) act as secondary hubs.
The recent acquisition of five ATR 72-500s has enabled the carrier to bring air travel to regional destinations which do not have enough traffic to justify the 737s. Three aircraft are in service, a fourth will join the fleet this month and a fifth will arrive in April.
The ATRs serve Chandigarth, Keshod, Porbandar and Udaipur, with the new arrivals destined to fly to Vishakhapatnam and Tirupati. The turboprops operate 25 daily flights, but this is set to rise significantly as the new aircraft come on line.
Goyal acknowledges that taking on the ATRs was a "calculated risk", because of uncertainty about the popularity of turboprops in the market. There is, however, a strong expectation that the new ATRs will be liked. "They're a very advanced aircraft, very quiet and very reliable", says Datta. "The ATRs are an investment that will help us to create new markets and generate more traffic for the 737s," he adds.
Goyal reveals that he is considering doubling the ATR fleet. "We need more small aircraft," he says, adding that the airline is also "talking to all potential suppliers" about a possible purchase of 70-seat regional jets.
To retain passenger loyalty, Jet has given the ATRs an internal configuration that enables cabin staff to offer the same quality of service as on its 737s. This has meant removing two rows of seats to make room for extra baggage in the rear and for two galleys to maintain a hot meal service on all except the shortest-haul flights. Daily newspapers are provided.
Kerosene tax cut
The advent of the ATR 72s has coincided with the Indian Government's long-awaited decision to slash tax on kerosene fuel for turboprops from about 30% to 4%, halving direct operating costs, to 20%. The move followed hard lobbying by the airline industry, but also reflects the policy of the new government, led by Prime Minister Atal Behari Vajpayee, to open the country to regional development. India has for years been run on a semi-Soviet type planned economic model which, in the words of one observer, led to a "skewing of the marketplace and unfair penalties on some business sectors to benefit others".
The fuel tax pay-off comes with the government's demand that airlines continue to operate into uneconomic areas - hence Goyal's comment that, at least in the short term, the ATR 72 operation "will lose money". He adds, however, that the ATR 72's initial three months of operations have been successful enough to warrant considering an order for five more aircraft.
The 737 remains at the heart of Jet Airways' operations, which began on 5 May, 1993, with service entry of the first two of four 737-300s on order. These aircraft formed the mainstay on which the carrier built its business - and reputation - in the early days.
In its first financial year, 663,000 passengers were carried to 12 destinations, with an average load factor of 69.8%, daily aircraft utilisation of 8.26h and a 6.6% market share. By 1995/6, the number of destinations had grown to 14, the annual number of passengers stood at 1.5 million and average daily use had increased to 10.73h. Market share doubled. Estimated figures for 1999/2000 are for a 33% share and 4.8 million passengers. Utilisation has dropped slightly, however, to 9.54h daily.
In April 1994, the first of twelve 737-400s entered service, to be followed in December 1996 by the first 737-500, of which three examples were ordered. The airline then switched to New Generation 737s, with an initial order for four 737-700s and two 737-800s. A subsequent order added six more -800s to the fleet.
The only immediate alteration in the Boeing fleet has been the exchange of two of the -400s for two -800s in February and March. With the arrival of the final two ATR 72s, the fleet will total 30 aircraft. Of these, 18 (including all of the ATR 72s) are leased. The rest are owned.
The average stage length flown by the Boeings in the 145 flights operated daily is 832km (450nm). Passenger cabins are configured in a two-class layout. Club Premiere seats have a 96.5cm (38in) pitch.
Capt Les Hayward, senior general manager for line operations, points to India's 11 million daily train passengers as one of the main targets for growth. "If only 1% or 2% of those start travelling by air, we'll have trouble coping with our own success," he says. Hayward was previously head of Boeing 747 operations at Qantas.
Recurrent pilot training on the 737 Classics is carried out by Malaysia Airlines in Kuala Lumpur, and on New Generation aircraft by SAS at Stockholm and by Boeing in Seattle. The airline also has agreements with Dutch flag carrier KLM and Germany's Lufthansa Technik for NG simulator training. Jet Airways has just signed for a 737-800 simulator from CAE for delivery in September. "This will make a lot of difference," says Hayward. "There's a worldwide shortage of New Generation simulator capacity at the moment".
The airline carries out its own maintenance to C-check standard, mainly at Mumbai, but is provided with limited facilities in which to carry out the work.
"We're really squeezed for space," says Hayward, pointing to the vast facilities afforded to state-owned Air India and Indian Airlines. Jet Airways leases a hangar at New Delhi, although it is negotiating for its own. Hayward adds that Indian bureaucracy represents a "major challenge" to any planned advances. "It is changing, but only slowly," he adds. Because Jet Airways has no facility large enough to accommodate an entire aircraft, C checks have to be timed around the monsoon season, between May and September.
The airline also faces problems in its terminal area at Mumbai, which is the old domestic terminal vacated by Indian Airlines when it moved to its own building. Jet's Mumbai terminal, in contrast, has to be shared with Sahara Airlines and is in operation at full capacity in antiquated conditions.
The weather also poses major operational problems at New Delhi, which is often hit by fog, mist and pollution that can descend in a matter of minutes. The result is closure of the airport and a knock-on effect in the entire northern half of India. "We can lose 40% of our operations out of New Delhi in a day," says Hayward. Operators are therefore looking forward to the installation of a Category 3 instrument landing system at the end of the year - although only the New Generation 737s will be equipped to use it.
There are no plans, however, to install head-up displays (HUD) and test the progress of bureaucratic change. As one source puts it, "the thought of getting the Indian civil aviation authority certification for a HUD makes me go weak at the knees".
The emphasis on safety is rigorous. Hayward uses the 737 digital flight data recorders to check on pilot performance by dialling in "no exceedence" parameters that can be picked up when the data is downloaded after each day's operations. "They're tougher than the ones we used at Qantas," he says. "All exceedences, such as late flap selection, high rate of descent and so on, come to my desk," he adds.
The minimum age for captainship is 25 years. "There's a lot of objection to that, but I insist," says Hayward. Prospective captains must have a minimum of 3,000h in the left-hand seat, 1,000h on 737s. ATR pilots must have a minimum of 1,000h on twin turboprops.
Jet Airways has 117 interline agreements with airlines worldwide and marketing agreements with British Airways, KLM and Northwest Airlines, providing for frequent-flier tie-ups and through check-in.
No foreign airline is allowed to take equity in an Indian-owned carrier, so there is no question of any sell-off or stake in Jet Airways, although Goyal says he is considering an entry on to the Indian stock exchange when "we're sure we're profitable".
Goyal adds that operations beyond the Indian border are being considered. "We're looking seriously at routes to both the east and west of India, such as Nepal, Bangladesh and Sri Lanka," he says. This development has become possible because of the Indian Government's draft civil aviation policy, which, for the first time, allows domestic airlines to operate to foreign destinations.
Further development is clearly inevitable and, in the increasingly competitive environment that will result from privatisation of Air India and Indian Airlines, Jet Airways looks well placed to survive - and prosper.