ON THE surface, Jet Airways’ determination to conquer the international airline market looks premature.

The number of Indians taking domestic flights has increased at least 25 per cent a year in recent years and this growth is expected to continue, seemingly offering plenty of scope for Jet Airways to boost its profits at home.

Yet the market, once confined to Air India and Indian Airlines, the state-owned international and domestic carriers, has become increasingly competitive as the success of airlines such as Jet Airways has spurred a flurry of new entrants. Many of the new players are low-cost carriers, which have forced Jet Airways to lower its prices and, in turn, its profitability.

As a result of this, Jet Airways’ market share, which stood at 45.9 per cent in the year to April 2003, had fallen to 36 per cent by January this year — albeit it in a bigger market.

Jet Airways, which remains the biggest domestic airline despite its declining market share, agreed to buy Air Sahara, one of its main rivals,for $500 million (£285 million) in January.

Naresh Goyal, the founder and chairman of Jet Airways, said: “There are serious problems for infrastructure in India. There are no new parking slots or gates available, so you have to consolidate to grow.”

The acquisition of Air Sahara will boost Jet Airways’ market share by 12 percentage points to 48 per cent. However, the Indian Government has signalled its intention to improve the country’s airports, which should help to ensure the continued growth of the industry in the longer term.

Praful Patel, the Indian Civil Aviation Minister, recently said that the Delhi and Bombay airports would be revamped over the next seven years, at a cost of about $10 billion.

The Government will sell a 74 per cent stake in the Delhi airport venture to a consortium. The Bombay airport revamp will be structured in a similar manner.

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