Air India Express Exploring Partnerships To Reduce Dependence On Gulf Region

Air India Express has entered into a codeshare partnership with parent Air India and is exploring similar partnerships or joint ventures with other commercial airlines in order to diversify the business and reduce its dependence on markets in the Middle East.

The slowdown in Middle East economies is pushing the airline to look at other avenues to de-risk its business. Rising capacity constraints has also prompted the airline to look at expanding into other markets.

“We will look at other carriers in the region with whom we can have fruitful partnerships, mutually beneficial that is,” said K Shyam Sundar Chief Executive Officer at Air India Express, the low-cost arm of Air India.

The airline will commence a New Delhi-Dhaka flight from February 15 as part of its codeshare agreement with Air India.

Middle East: A Pain Point

Currently, 85 percent of the airline’s revenue comes from the Gulf region, and it uses 80 percent of its capacity on these routes, Sundar said.

Air India Express expects its revenue to decline by Rs 250-300 crore from what it had budgeted for the financial year 2016-17 as yields in the Gulf countries dropped by 15-20 percent in the second half, said Sundar. As a result, it is expected to miss its revenue target of Rs 3,550 crore for this financial year, he added.

The company had a good run in the financial year 2015-16 when it reported a profit of Rs 362 crore supported by lower crude oil prices.

Increasing Capacity

Air India Express added six new aircraft in 2016 to take its fleet strength to 23. It plans to induct two planes by the winter of 2017, Sundar said. That will still leave the company behind its target for the financial year 2017-18.

To tap this potential, the airline is looking at newer destinations in Bangkok, Manila, and other Asian countries.