Air India - The Virgin Airways Saga

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Who will Rule the Delhi-London Skies? Contd...

Since BA had proposed a fare of about Rs 27,000 on the Delhi-London sector, Branson said VA would file an application with the GoI for a lower fare. At the same time, VA would respect the Government's sentiments on fares, since it was a regulated market, Branson said. In June 2000, VA announced that it would start its operations in India in July with a bi-weekly service-Wednesdays and Fridays from London and Thursdays and Saturdays from Delhi.

VA planned to launch a third weekly flight around October. The airline would offer low introductory fares. Mackenzie Grant, VA's general manager for India said the initial fare was still being worked out and that it would be difficult to give a comparison with competing airlines. Analysts felt that VA would give BA some stiff competition, not only in terms of fares, but also with its array of services such as sleeper seats, massage services and lounge facilities. Said one, "Virgin's entry will certainly be a boost to services between India and Europe. The airline has a high quality product." Branson promised VA fare would be extremely competitive. Analysts felt that competitive pricing would mean that VA would price its Delhi-London flight for less than Rs 25,000, which was approximately the A-I fare. A-I feared there would be an exodus of its already dwindling passenger list. Meanwhile, BA was bracing itself to meet the VA challenge on the Delhi-London sector. The airline announced direct daily services between London and Delhi from October 30, thereby increasing capacity by 25 per cent on this sector.

For this, the airline suspended its twice weekly service to Calcutta and terminated its five times-a- week service from Delhi to Dhaka from October 30. The changes were made as part of a renewed bilateral agreement between UK and India signed in February 2000. On July 5, 2000, VA dropped a bombshell.

It slashed its introductory airfare from the normal Rs 42,598 to Rs 31,000 for a return ticket on the busy London-Delhi route. But just before VA's entry into Indian airspace, BA also announced a special economy-class fare: a Rs 27,635 round trip ticket. According to analysts, consumers were at last getting the benefits of a liberalised competitive sector.

In July 2000, BA won the right to three more flights per week between India and Britain, drawing an immediate protest from VA. According to BA's South Asia manager Alan Briggs, under a special arrangement outside a bilateral aviation agreement, the GoI had given BA permission to fly three times a week to the eastern city of Calcutta.

Under the bilateral pact, which was renewed in February 2000, BA and A-I were each allowed to fly 16 times a week to each other's home country. A-I used 10 of its 16 weekly flight entitlements on the route. BA used all 16 of its flight entitlements, with seven flights a week to Delhi, seven to Mumbai and two to Madras. BA had been lobbying since 1993 to increase the number of its flights to India.

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