New Indian carrier Air Kerala closer to launch with plans to expand to UAE by 2026

Air Kerala Nears Launch with Domestic Operations Set for Next Year, Plans UAE Expansion by 2026

Plans for a new Indian airline, Air Kerala, are gaining ground with the company now targeting the launch of its domestic operations in the first quarter of next year and expanding internationally by 2026, according to the UAE-based businessman spearheading the company.

The company behind the airline, Zettfly Aviation, has received the initial no-objection certificate (NOC) from India’s Civil Aviation Ministry to operate air transport services, its chairman Afi Ahmed told The National.

“The first step is the NOC; it’s one of the biggest tasks, and that task is now covered,” he said. The next steps will be to focus on the technical aspects, flights, and contracts for the engineering companies, with all of that expected to be fulfilled in “around six to eight months.”

Ultra-Low-Cost Airline Strategy

Being set up as an “ultra low-cost airline,” Air Kerala plans to start out with three ATR 72-600 aircraft and grow its fleet to 20 for international expansion. The company is exploring the possibility of leasing the aircraft or buying the planes.

The company will require an estimated 60 to 100 crore Indian rupees ($7.1 million to $11.9 million) in funding initially, with the amount rising to 250 crore rupees to 300 crore rupees ($29.6 million to $35.6 million) for growth when it expands its route network to international destinations.

Historical Background

The idea of Air Kerala was first proposed by the Kerala state government in 2005, and the airline was registered as a fully owned subsidiary of Cochin International Airport in 2006. Although it was announced with much fanfare and was touted as one of the most popular and ambitious projects to support Keralites living abroad, the project was shelved several times by successive governments.

Revival and Future Plans

Mr. Ahmed, founder of Dubai tourism agency Smart Travels, last year bought the domain name airkerala.com for Dh1 million ($270,000) and then decided to revive plans for the airline. Its proposed launch comes amid growth in India’s aviation sector. Domestic traffic is forecast to grow 6 percent to 8 percent annually to reach up to 164 million airline passengers for the year ending March 31, 2025, aviation consultancy Capa India said in a report this month. Meanwhile, international traffic is projected to grow at a slightly faster pace of 9 percent to 11 percent year-on-year, to reach up to 78 million passengers during the period.

Initially, Air Kerala plans to serve cities within the state of Kerala as well as across India that are not currently well-connected. The airline’s biggest selling point will be its ultra-low-cost model, Mr. Ahmed said. Another unique selling point will be “the timing” because “we will make sure that we will be on time,” he added.

Funding and Partnerships

The company is open to a public-private partnership with the Kerala state government, in case they are keen to tie up, the businessman said. It is also open to teaming up with expatriates, as well as external funding. “If there is somebody who wants to join with us because we are expanding … then I can [achieve] the plan a little bit faster,” he said.

International Expansion

In terms of international expansion, the company is confident the huge number of expatriates from Kerala will support its growth. The number of emigrants from the Indian state stood at more than 2.2 million, according to the Kerala Migration Survey 2023, which was released last month. The size of the global Malayali diaspora has grown to reach an estimated five million, the report found.

The Gulf remains the preferred destination, with 80.5 percent choosing the region and the UAE topping the list in terms of countries. Air Kerala is not keen on focusing on only one specific city within the UAE, Mr. Ahmed said. “If we are getting an opportunity from Fujairah also, we will do it … if you look at who is leading the market, it’s [driven by] price … that’s the reason we will make sure that our costs are ultra-low.”

However, final decisions on pricing and destinations will be taken at a much later stage and will depend on how its international expansion strategy shapes up. For now, the company expects to be in the red for two years after launching operations. “Third and fourth year [is when] we are going to start to get profits,” he said.

Growth in India’s Aviation Sector

Air Kerala’s launch comes at a time of significant growth in India’s aviation sector. Domestic traffic is forecast to grow 6 percent to 8 percent annually, reaching up to 164 million airline passengers for the year ending March 31, 2025, according to aviation consultancy Capa India. International traffic is projected to grow at a slightly faster pace of 9 percent to 11 percent year-on-year, reaching up to 78 million passengers during the same period.

The growing demand for air travel, both domestically and internationally, presents a significant opportunity for new entrants like Air Kerala to capture market share by offering competitive pricing and efficient service.

Initial Route and Fleet Plans

Initially, Air Kerala plans to serve cities within the state of Kerala as well as across India that are not currently well-connected. This strategic focus aims to meet the demand for better connectivity in underserved regions, providing a boost to local economies and facilitating easier travel for residents.

The airline’s initial fleet will consist of three ATR 72-600 aircraft, known for their fuel efficiency and suitability for short-haul routes. As the airline expands, the fleet is expected to grow to 20 aircraft, enabling the launch of international routes and increasing the frequency of domestic flights.

Ultra-Low-Cost Model and Market Positioning

Air Kerala’s biggest selling point will be its ultra-low-cost model. By keeping operating costs low, the airline aims to offer affordable fares to a broad customer base, including budget-conscious travelers. This cost-effective approach is expected to attract a significant number of passengers, particularly those who might otherwise travel by train or bus due to cost considerations.

Another unique selling point for Air Kerala will be its commitment to punctuality. “The timing” will be a key focus, Mr. Ahmed emphasized, with efforts made to ensure flights operate on time, enhancing the overall travel experience for passengers.

Funding and Partnerships

To support its ambitious plans, Air Kerala will require substantial funding. The initial phase will need an estimated 60 to 100 crore Indian rupees ($7.1 million to $11.9 million), with the amount rising to 250 crore rupees to 300 crore rupees ($29.6 million to $35.6 million) for international expansion.

The company is open to exploring various funding options, including public-private partnerships with the Kerala state government, collaborations with expatriates, and external investment. Mr. Ahmed expressed optimism about the potential for partnerships, stating, “If there is somebody who wants to join with us because we are expanding … then I can [achieve] the plan a little bit faster.”

International Expansion Plans

Air Kerala’s international expansion strategy will be driven by the significant number of expatriates from Kerala living abroad. The Kerala Migration Survey 2023 reported that more than 2.2 million emigrants are from the Indian state, with the global Malayali diaspora estimated at five million. The Gulf region remains the preferred destination for these expatriates, with 80.5 percent choosing the area and the UAE topping the list of countries.

The airline is not limiting its focus to one specific city within the UAE. Mr. Ahmed stated, “If we are getting an opportunity from Fujairah also, we will do it … if you look at who is leading the market, it’s [driven by] price … that’s the reason we will make sure that our costs are ultra-low.” Final decisions on pricing and destinations will be made at a later stage, depending on the international expansion strategy’s progress.

Financial Outlook

Air Kerala expects to operate at a loss for the first two years after launching its operations. However, the company is optimistic about its long-term prospects. “Third and fourth year [is when] we are going to start to get profits,” Mr. Ahmed predicted. The airline’s ultra-low-cost model, combined with the growing demand for air travel in India and internationally, positions it well for future profitability.

Air Kerala’s impending launch marks an exciting development in India’s aviation sector. With its focus on ultra-low-cost travel, punctuality, and underserved routes, the airline is set to offer a valuable service to both domestic and international travelers. As it prepares to take flight next year, Air Kerala aims to capture a significant share of the growing aviation market and fulfill the long-held vision of providing affordable and reliable air travel for Keralites and beyond.