Air Costa

Air Costa, the latest Indian regional airline to take to the skies plans to apply for a pan-India licence in the next 6-8 months to take on the likes of IndiGo, SpiceJet and the soon-to-start AirAsia India in an industry which is marked by aggressive expansion and constant losses. Under the current licence, the Vijaywada, Andhra Pradesh-based airline can’t fly to metros outside the southern region, its CEO KN Babu said.
The airline operated its inaugural flight on Monday to Hyderabad from Vijaywada. It plans to start commercial flights from Tuesday and will operates 12 flights to six Indian cities — Chennai, Bangalore, Ahmedabad and Jaipur, Hyderabad and Vijaywada.
Costa means the outer edge of a wing, which is where the airline derives its name from. Babu said the airline has started with two 80-seater Embraer 170 jets and will induct eight 112-seater Embraer 190 planes by the end of 2014, making its fleetsize 10. It plans to increase its number of daily flights to more than 60 by then. Air Costa plans to increase its fleetsize to 25 planes by 2018, said C.T Chowdary, director finance at its parent LEPL Projects. The airline is starting with an investment of Rs.150 crore and aims to invest $100 million more in the next 2 years. Chowdary said the company will raise the money through internal accruals and from close associates of the group.
Chowdary also said Vijaywada-based LEPL Group is in the process of hiving off all its businesses including the airline into separate subsidiaries and may looking at listing the airline publicly once the economy and market improves. Chowdary said the airline will be in the budget aviation space and will aim at operating in “long distance, low density sectors” such as Jaipur-Bangalore which currently have few or no non-stop flights. Air Costa is the second Embraer operating regional airline to base its operations in South India, the region with the largest number of metro cities and a major gateway to the middle east.
In 2005, Paramount Airways had started flying as a regional carrier with a business model to connect the smaller cities in India with Embraer jets.
The airline shut down operations in 2010 after legal issues with the lessors of its aircraft. Another carrier MDLR Airlines had started operations in 2007 but shut down two years later.
Air Costa starts operations at a time when the airline industry is going facing high input costs and a slow growth in air travel demand. Also, while the industry is already said to be overcrowded with five years, Air Costa will face further competion from Malaysian carrier AirAsia and Singapore Airlines both of which are planning Indian units via tieups with the Tata Group.
“Our airline will offer more comfortable services than AirAsia. You can’t fly an Airbus 320 to the smaller cities of India such as Rajahmundry,”said Babu, referring to the fleet type the Malaysian carrier plans to use.