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PARAMOUNT EXPANSION A PIPE DREAM?
Chennai-based regional carrier Paramount Airways plans to start international operations by 2011. Managing Director M. Thiagarajan declared: “As soon as we finish five years of operations in 2010, we plan to start international operations.” Paramount Airways initially hopes to explore direct flight operations to select destinations on the lucrative European and US sectors. As part of its preparation to fly international, Paramount is currently holding final negotiations with US aerospace major Boeing and Toulouse-based aircraft manufacturer Airbus for acquiring at least 10 wide-bodied planes. An official said the airline is actively considering Boeing’s B 777 family of planes or Airbus A 330 as its final choice. The deal is likely to materialise and an announcement may be made during the ongoing Singapore Air Show 2008.
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aunched on October 19, 2005, Chennai-based Paramount Airways is a low-cost airline in the private sector. Owned by Madurai-based textile giant, the Paramount Group, the airline is unique on a number of counts. Unlike other low cost or full service airlines in India, its aircraft are configured to a combination of only first and business class sections catering to a narrow segment of the society. The airline offers good value for money at highly competitive prices. Also, Paramount Airways is the only airline in India to operate the Brazilian Embraer family of aircraft. Over the last two-and-a-half years of existence, Paramount Airways has managed to build up its fleet to just five aircraft. In this period, the airline has essentially been validating its exclusive but somewhat doubtful business model. Adopting an extremely conservative approach, the airline has resorted to scaling down operations cutting out non-profitable sectors confining operations to southern India to focus on profitability. Whether or not the business model adopted by the airline is successful, cannot be stated with any degree of certainty as the cumulative losses suffered by all airlines in India by the end of the financial year 2006-07 is estimated to be in the region of $700 million (Rs 2,800 crore). It is unlikely that any airline, least of all Paramount Airways with its rather difficult business model, is truly out of the red, claims to the contrary by the airline management notwithstanding. Over the next three to four years, the airline has intentions to expand its fleet to 60 aircraft involving investments of over $2.5 billion (Rs 10,000 crore) and progressively enlarge its footprint to cover the rest of the country. However, given the seemingly cautious approach the airline has displayed to date, the stated expansion plans appear somewhat unrealistic and unconvincing. As of date, the airline has a long way to go before it can shed its distinctly regional identity. In this context, indications by the airline management of
intentions to foray into the international arena with direct flights to the US and Europe, adds a perplexing dimension to its strategic plan and is in jarring contrast to both its character and track record. For international flights to the US and Europe, the airline would have to acquire a fleet of wide body jets either from Boeing or Airbus, necessitating sizeable investments in human resources and infrastructure associated with the induction of a new type of aircraft. Also, whether the airline has the financial resilience to muster the enormous resources required over and above the investment committed for the expansion of the Embraer fleet, is not quite clear. It is also not yet clear whether the airline has plans to replicate its unique cabin configuration adopted for the domestic sector. In all probability, the airline may opt for a more conventional approach in this regard. Paramount Airways will complete five years of operation in October 2010 by which time the airline intends to supplement its current fleet by inducting more than 20 aircraft. Armed with these two attributes, the airline will technically be eligible to operate international flights. On account of lower international fuel prices and higher fares, such a move is expected to offer better margins of profit. The airline’s effort at expansion of its domestic fleet and planning to emerge on the international scene is indeed lofty and laudable. However, so far, apart from ambitious pronouncements of intent, there has been little movement on the ground by way of effective execution of plans. Finally, given the financial, technical and operational complexities involved in the management of a mixed fleet with radically different types of aircraft operating on domestic and international sectors, Paramount Airways may well be fishing in troubled waters. In the final analysis, the recent pronouncements may well turn out to be merely another exercise in public relations that are usually timed to coincide with international air shows. SP — Air Marshal (Retd) B.K. Pandey Issue 2 • 2008
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