Then there is 
another reason why it scores well, making “international” dreams sour for Indian airliners with its fuel cost advantage. With the advantage of low costs (as ATF prices are lower in international markets), Cathay’s Indian plans should give many Indian carriers a “shake-up” call! As per industry sources ATF prices in the domestic market are higher by 53% as compared to international standards. That basically means that Cathay Pacific can avail of cheaper ATF prices as Aniket Mhatre, Aviation Expert, PLIndia convincingly states, “The costs for international carriers are lower as ATF outside India is at Rs.32/litre as against Rs.49/litre in India. As ATF contributes to about 40-45% of airlines costs, costs for flying international are lower (as you can refuel overseas, as Air India does). Hence, international yield per seat is higher.” With the 9-10% hike, consequently, the difference will go up to 70%! Some advantage for Cathay.
Tie-ups are one way, which Cathay is also using to establish an increased presence in India, while at the same time holding caution of not getting into the ‘bloody’ Indian water. The carrier has recently tied up with Jet Airways and a couple of other airliners to serve as feeders as Binit Somaia, Regional Director, CAPA confirms, “Cathay will seek to tie-up with a domestic carrier to provide connecting feed to and from its gateways of Delhi, Mumbai, Chennai and that of its subsidiary, Dragonair, in Bangalore.” So does that mean Cathay is looking at some acquisition in the Indian market soon? “No! We’re not. And besides the current policy in Indian aviation does not allow us to. But even if that wasn’t the case, we don’t intend to,” snaps Tom. Cathay’s strategy clearly is an example of a capitalistic entity operating in a global environment with one clear focus – zero fanatism. On his recent visit to India, even Anthony Tyler, CEO Global, Cathay Pacific had remarked, “India will become one of our biggest sources of revenue in the near future… What’s happening in India is an absolute bloodbath but to put the record straight on LCCs; LCCs are not developing as fast in Asia as they have in US.” Better cost management is what makes Cathay an airship to be wary of. “We keep our costs down by selling tickets cheaply and through better yield management. I call it cost management not cost cutting. No matter what, we won’t compromise on the quality, or on safety and maintenance,” he adds while calling the capacity addition of Indian airlines “extremely irrational”.
Surely after having given airliners in North America, Middle East, China, and other regions some sleepless nights, it’s the turn of the Indian carriers who are currently making losses, and dreaming to go international. So what’s the solution for them? “Learning from the ‘careful yet profitable’ winner’s rule book,” is the obvious guess!
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
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