Corporates sign assured occupancy agreements with Air Deccan

Low-cost carrier Air Deccan is betting on assured occupancy agreements with Indian corporates for developing its feeder route network. Following a pilot deal with Welspun India on the Mumbai-Kandla sector - where the BK Goenka-led company is partly underwriting the daily service - Air Deccan is close to inking a similar deal with the Tatas on the yet-to-be-launched Kolkata-Jamshedpur flight. The country’s second-largest carrier said it has received similar proposals from a host of corporates to start operations on low-volume sectors across the country. The no-frills carrier is also in talks with JSW Steel for underwriting 10 seats on the recently-launched Bangalore-Bellary route. The arrangement with the Tatas involves the group company Tata Steel that is preparing to open up its private airstrip in Jamshedpur. Welspun India has signed an arrangement with Air Deccan for 13 seats per day on the Mumbai-Kandla route. Welspun deposits cash with the airline that issues tickets for the company at a specific price on a monthly basis.

If the company doesn’t use the paid capacity, the airline releases the seat in the market 24 or 48 hours before the flight takes off. However, it still keeps a few contingency seats for Welspun. Incidentally, Mumbai-Kandla route has been registering a load factor of 95%. “The entire Air Deccan model revolves around 80% load factor. The underwriting model is a hedge for us when our flights run below the benchmarked load factor on the low-volume routes. We invoke the underwriting facility only in such cases,” Deccan Aviation principal sales & marketing officer Samyukth Sridharan said. “Aviation is integral to the ongoing economic growth, and improving regional connectivity with business is the key to bolstering operational efficiencies of the corporates,” Deccan Aviation MD Capt GR Gopinath said. Air Deccan is in talks with various corporates for similar arrangements to operate services to Madhya Pradesh, Orissa, Maharashtra and Tamil Nadu.

For instance, in Orissa, it could tap into the opportunities presented by the mining industry for operating into the hinterlands. Interestingly, the government bodies in Madhya Pradesh and Maharashtra too have expressed interest in underwriting flight operations even though nothing is definite yet. Meanwhile, Air Deccan - which is planning to carry 7.4 million passengers in the financial year - is planning to add new destinations such as Sholapur, Udaipur, Jodhpur, Dimapur and Shillong to its network this year. Mr Sridharan said, “Varanasi is high on our list and we intend to launch flights to Varanasi by the year end. Orissa belt will be on the anvil in 12-15 months and we are evaluating Leh as well.”

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