Mr. M. Thiagarajan, Managing Director, Paramount Airways hails from renowned industrial family from Madurai that has varied business interest like Textiles, Banking and Insurance. Prior to launching Paramount Airways, he entered into the family business of textile and established his own textile mill- Paramount Mills. Under his leadership, Paramount mills won the National Award for the highest export of cotton products from the Textile Export Promotion Council of India.
Paramount Airways is the first premium service, all business class airlines with a unique business model. Paramount launched its operations in October 2005 and has since achieved a market leadership of 27% in southern India. It has been created with a vision to offer a new dimension in air travel, taking it to higher vistas of comfort and class; ensuring that passengers get true value for money while being pampered to the hilt. The airline prides itself in providing value based service excellence that truly makes a world of difference.
Speaking with Yash Ved of India Infoline, M. Thiagarajan says "The low cost model will not work in India as there is hardly any differentiator between full service carrier and low cost ones."
What is your reaction to Full Service Carriers planning to shift more capacity towards the low-cost business? Are the budget airlines prepared for their entry into this space?
The Indian aviation industry is going through turbulent times and suffers from over capacity. The over estimation of growth has resulted in the current depleting conditions of the airlines along with high tax structure in the country. The Indian civil aviation industry needs to adjust capacity to meet demand. There is a huge mismatch between demand and supply. I am optimistic about the long term future.
The low cost model will not work in the Indian market as there is hardly any differentiator between full service carrier and low cost. We do not have secondary airports like Europe and the US. Operating in secondary airports is substantially lower for budget airlines in those countries. In India, the cost of food is not a major factor. Full service carriers and low cost carriers need to bear the same costs. The same pilots and engineers are hired by the airlines. There are no secondary Human Resources.
How is Paramount Airways coping with the downturn in the worldwide aviation industry and the global economic slump?
There is corrective measure that is being adopted by airlines to remain healthy and competitive in the industry. From fuel analysis, to route optimization and human resource; airlines are looking at different ways to contain costs in the current economic slowdown. A strong business model will help overcome the obstacles and the focus should be on better yields than gimmick cheap fares. We are stringent with our cost optimization. A premium does not mean a high cost airline, just one that is high on comfort and passenger requirements.
How do you see the aviation industry shaping up going ahead? What remedial measures do you suggest to make the industry stronger?
Passenger and freight traffic has been falling globally due to tough economic climate. Many airlines are deferring orders and cutting capacity. We have also seen many international players pulling out operations from many cities within the country. Carriers also saw in decline in passenger due to Influenza A(H1N1) besides the overall recession in the market. But we are seeing improvement.
Pertaining to the India, we will need to focus on the issues mentioned below to improve conditions.
- Rationalization of airport charges
- Trimming of excess capacity
- Avoiding price wars.
Could you share the load factor figures for August as well as for the previous months? What is the year-to-date load factor?
We have the highest load factors in the country and as of July, it was 85.9%.
What is your USP for sustainable growth?
We believed in a managed growth and the true resilience and equity of the business model is amply reflected in the current economic slowdown. We have also opted for smaller e-jets that are highly fuel efficient and also provide a feeling of a corporate jet for our passengers. We have also been following the policy of ‘right sizing’. This also a key reason on choosing the Embraer jets apart from its great avionics and high fuel efficiency. This gave us the luxury of having more frequency on the same sector with good load factors. By having a major presence the south, it gave us an economy of scale and regional market dominance. We have effectively positioned Paramount Airways as an airline offering value based services.
Brief us about your agreement with Airbus to buy 10 A321 passenger jets? What is the list price of these planes? Do you have option to order more planes in future?
We have signed a memorandum of understanding (MoU) to buy ten A321 aircraft with an option for additional 10 at the Le Bourget air show outside Paris .Each Airbus A321 carries a list price of US$90.3mn (Rs434.34 crore) approximately. We will deploy these aircraft for our international operations.
When do you plan to launch the international services? Which destinations are you looking to connect globally whenever you launch the global operations?
After the mandatory five year completion in domestic operations, we look at the international skies. Depending on our market studies we will decide the destinations. We will enter new markets that will provide us enough bandwidth to operate. We will consolidate our position and have a strong national presence. Initially, we look at markets that are closer to home like the Middle East and Far East.
What is your market share? What is your market share in south where you are pretty strong?
We are premium business class airline. We have a market share of 27% in our southern India operations.
What are your plans for the Indian market over the next few years?
We will continue to have a managed growth and adopt right sizing in our operations. Paramount Airways currently flies to 16 destinations and we have recently forayed into the west with Ahmedabad, Pune and Goa north and north eastern sector with Kolkata, Guwahti, Agartala and Delhi. We would like to intensify our presence in the domestic market by 2010.
Tell us about your employee strength? Are you planning to hire more?
We are currently over 700 employees. We have been recruiting staff as in tandem with the rapid growth of the company.
Are you planning to broaden your services to other areas of the country? Which new destinations are you planning to connect?
Yes, we will look at diversifying our business strategically to increase our revenues. Our cargo business was natural extension of this. We will be agile to markets and explore opportunities.
Given the cut-throat competition do you foresee any shake up in the Indian aviation industry? Would you be interested in any M&A activity?
The Indian civil aviation industry needs an overhaul. We did see two of them coming together but the partnership have not gained momentum.
No, we would not be interested in any M&A.
Is the company planning any fund raising for future growth and expansion? If yes, which route are you likely to adopt for the same?
The financial health of the company is sound and we will look at internal accruals for sustaining our growth.