In a bid to gain a bigger share in one of the world's biggest markets, Qatar Airways announced on Wednesday its plan to launch a new domestic airline in India. This would be the first airline venture in the country that would be fully-owned by overseas entities.
In a media interaction at the ITB Berlin travel fair, Chief Executive Officer Akbar Al Baker said that the Gulf carrier would make an application to the Indian authorities 'soon'.
"We are joining hands with the investment arm of State of Qatar to start a domestic airline in India with a 100 percent investment," Al Baker said.
"We are doing this because Indian government has opened up the foreign direct investment in (setting up) an airline in India," he added.
In the past, Qatar Airways has repeatedly expressed its interest to invest in IndiGo, the country's largest domestic airline. However, nothing could be finalised in that deal.
Last June, liberalising the FDI regulations, the Government allowed foreign investors -- barring overseas airlines -- to own up to 100 per cent stake in local carriers. At present, foreign airlines are allowed to invest only up to 49 per cent in domestic carriers.
Qatar Airways is British Airways-owner IAG's biggest shareholder. It also has its stakes in South America's biggest carrier, Latam Airlines Group SA and Italy's second-largest airline, Meridiana Fly SpA.
The Gulf carrier has been trying to expand its presence in India but its growth has been limited because of limitation of traffic right.
On the latest development, Aviation secretary, Rajiv Nayan Choubey said, "I did not expect this (so soon), We will await for the application and will process it as per government policy".
Qatar Air's announcement comes amid the sector going downhill due to rise in aviation turbine fuel (ATF) prices, intensifying competition, and falling yields.
In fact, most players in recent months have been able to post profits only due to income from non-core areas, that is, activities other than selling tickets.
Market leader IndiGo, with 39.3 per cent passenger traffic share in 2016, reported a 26 per cent drop in net profit in the third quarter of 2016/17 compared with the corresponding period of the previous year. Revenues grew 16 per cent during the period.
Jet Airways, the second-largest player in terms of market share, reported a 69.5 per cent decline in (standalone) net profit; revenues grew just 0.6 per cent. Gurgaon-based SpiceJet reported a 24.5 per cent drop in net profit and 12.5 per cent increase in revenues.
The dip in profits has come in spite of the airlines earning higher revenues, albeit marginally, on account of the overall increase in passenger traffic, which grew 23.18 per cent in 2016. Still, bottom lines felt the pressure, as average fares fell for most carriers.
IndiGo's yield went down to Rs3.48 in the December 2016 quarter from Rs4.14 in the December 2015 quarter. Yield is average fare per passenger per kilometre. This means if IndiGo was charging Rs4,753 for a Delhi-to-Mumbai ticket in the December 2015 quarter, it charged Rs3,995 for the same flight in the December 2016 quarter.
Ratings agency ICRA, in a December 2016 report, said that "addition of capacity by new airlines and rapid expansion of capacity by existing ones have resulted in an intensely competitive market and prompted airlines to resort to a variety of fare promotions to improve PLFs [passenger load factors]." It is these fare wars that cost airlines dearly.