Chairman, Shree Airlines
After 18 years of operating helicopter flights, Shree Airlines in August started scheduled air services through three newly bought Bombardier CRJ series aircrafts. With an aim to fast and comfortable service in the domestic aviation sector, the company has commenced flights with its one CRJ700 (70 seater) and two CRJ200 (50 seater) jet planes to five different locations including Bhadrapur, Biratnagar, Bhairahawa, Nepalgunj, Dhangadhi alongside scenic Mountain flights from Kathmandu. Founded in 1999 by late Banwari Lal Mittal, Shree Airlines is the largest helicopter service operator in Nepal operating both passenger and cargo chartered services at home and abroad. It has been operating flights for United Nations and World Food Programme in the African continent. The company having a fleet size of eight helicopters - six Mi-17 and two Airbus AS350B3e - is the only operator of Russian Mi-17 helicopters in the country. Sudhir Mittal, Chairman of Shree Airlines took over the company’s leadership in 2015 and his focus is now on the scheduled air services and also strengthening the chartered services. Mittal who holds a MBA degree from INSEAD, France was the first Residential Representative and Country Director of the International Finance Corporation (IFC) of The World Bank Group in Nepal. He has a decade long experience of working at IFC at various countries. In an interview with Madan Lamsal, Editor-in-Chief of New Business Age, Mittal talks about the new aircraft service of Shree Airlines, problems and prospects in the Nepali aviation sector and future plans of the company. Excerpts:
From helicopter services to scheduled aircraft operations, how has the journey of Shree Airlines been like over the last 17 years?
I was not engaged with the company for all the 17 years. The company was established by my father late Banwari Lal Mittal and he used to oversee its operations. After leaving IFC, I started assisting him in the business more in the strategic direction of the company rather than actual operations. For many of these years, I was out of the country and got fully engaged in it after he passed away in 2015.
The period has been both different and similar for Shree Airlines. We have been able to start chartered as well as scheduled aircraft services in the country. It’s been different for us in this regard. Helicopter services, for instance, are chartered services. The helicopters operate flights when they are chartered, otherwise they stay grounded. Airplanes on the other hand, fly on scheduled services. But anyway, both fall under aircraft services.
Given that Shree Airlines carries a long legacy of your late father in helicopter services, what reasons are behind your decision to move onto scheduled aircraft operations?
If my father had not decided to start helicopter services, we would have gotten into another business. His decision to step into this sector, his vision and ability to translate that vision into a fantastic managerial feat has made Shree Airlines the largest helicopter service company in Nepal which is also the only operator of Russian Mi helicopters in the country. We are the only helicopter company from the entire Southeast Asia region working for missions of the United Nations (UN). There are many such milestones under the name of Shree Airlines over the years. In his cautious expansion plans, we had discussed starting commercial scheduled service but we had to defer our plans due to the massive earthquakes of 2015. Now I am trying to fulfill his vision by taking it to the next level.
The Significant Safety Concerns (SSCs) issued by the International Civil Aviation Organization (ICAO) on the Civil Aviation Authority of Nepal (CAAN) also had a major bearing in our decision. The SSCs were issued by ICAO citing weaknesses of CAAN which had nothing to do with us. However the UN terminated our contracts citing the SSCs issued by ICAO on CAAN! We argued that Shree Airlines has been operating helicopters for UN for a long time and the global body has been assessing our service as “excellent” based on evaluation done in every three months. We have said that it is not justifiable to stop using our services and cancel our contracts due to some weaknesses of the Nepali civil aviation authority.
In this uncertain scenario, it was difficult for us to add new Mi-17s to the existing fleet as large Mi helicopters are not of much use in Nepal. Similarly, it was also not commercially viable for us to expand the small helicopter segment due to unhealthy competition. Then we did a feasibility study in the area of scheduled flights that uses fixed-wing aircrafts. We concluded that the scheduled services have been growing rapidly in Nepal as more people are opting for comfortable airplane flights over road transport. We commenced the study thinking that domestic air travellers will get attracted towards jet engine planes rather than turboprop aircrafts in the coming years. Then we decided to start flying small jet planes over the Nepali skies.
But operating fixed-wing planes are considered more risky financially compared to helicopters. What plans does Shree Airlines have to make the new venture commercially successful?
Yes, there are certain risks in running scheduled aircraft services. Operational costs are much higher and we have to fly the planes to the destinations even if there are no passengers. The planes cannot be grounded on normal conditions. But calculated risk taking is needed to succeed in business. We have calculated all associated risks and concluded that the new venture will be successful if we move ahead according to existing rules and regulations in aviation. All planes of the fleet of Shree Airlines are jet aircrafts made by Canadian manufacturer Bombardier.
The domestic aviation market possesses a lot of potential for airlines operators. If we can provide reliable services ensuring high level of safety to the passengers, there are no reasons for us to fail. Similarly, travelling in jet planes is more comfortable with larger leg room and it is faster than turboprop aircrafts. For example, one can reach Nepalgunj in just 40-45 minutes in a jet flight compared to over an hour on a turboprop plane. The level of noise in these new types of planes is also relatively low. All these aspects clearly show that planes with jet engines are more desirable. The only downside is the usage of fuel which is higher in jet planes than turboprop aircraft. It will be a bit hard for us to fly planes in case the price of aviation fuel goes up. Nevertheless, operating flights on long range sectors such as Dhangadhi and Nepalgunj will still be commercially viable for us due to the short time coverage of the flights.
Shree Airlines has gained considerable experience in international helicopter flights. Do you have plans to operate international flights with the new air fleet?
We applied for the international flight permit at the Ministry of Culture, Tourism and Civil Aviation while applying for the internal flight permit for our new air fleet. But we were suggested to commence operations with domestic air services. In a way, it is safer because the level of risk is much lower.
We have the longest experience in international flights besides the Nepal Airlines Corporation and now Himalayan Airways. We have operated helicopter flights in difficult conditions and terrains in Africa for the UN’s World Food Programme.
Right now, we will be concentrating our efforts to strengthen the newly started internal flights. However, in the future if we see demand and opportunities and become convinced about our own capabilities to operate internationally, then we will definitely get into it.
The Nepali aviation sector has been hit by the air flight ban imposed by the European Union since 2013. How do you think this problem should be resolved?
While my understanding about the issue might be limited, I do not agree with the EU’s arguments to ban Nepali airplanes from flying over the European skies. There is no direct air connectivity between European countries and Nepal at present as no Nepali airliner operates flight to Europe and vice versa. In this situation, a ban that forbids Nepali aircrafts from entering the European airspace seems unnecessary. If the EU wants its citizens who visit Nepal not to fly in Nepali airplanes to go to different parts of the country, how can they travel around here? Is it possible for tourists and mountaineers to go to Lukla without Nepali carriers?
We need to address the SSCs of ICAO which the international aviation regulator has issued citing some weaknesses of CAAN. Now that the ICAO has removed the SSC tag from Nepal, I am hopeful that Europe will follow suit soon.
How do you view the approaches of CAAN to come out of the EU safety list?
We have seen some progress in the ongoing process to come out of EU safety list. CAAN has been doing what it can in this regard. It won’t be justifiable to wholly blame the authority for the EU’s ban. It has been trying to improve the Nepali sector despite its limitations. The main problem there is the lack of an adequate workforce. As job seekers are generally attracted towards private sector jobs, it has become quite difficult for them to get trained manpower.
However, things have improved in the last 2-3 years as the officials are seen to be taking their work seriously. CAAN’s Director General Sanjiv Gautam is a committed official who has been putting in a lot of effort to improve the sector. With the removal of the SSC by ICAO, I guess it is only a matter of time before EU ban is also gone.
How do you assess the present scenario of the Nepali aviation sector? What problems are the domestic airliners facing? What are the prospects for business in the future?
The far too inadequate infrastructure has long been the main obstructing factor for the growth of the Nepali aviation industry. The holding of planes that are ready for flights for 1 to1.5 hours at the Kathmandu airport, difficulty in getting startup for aircrafts to takeoff, high holding times for planes to land along with lack of bay areas for international planes and parking areas for domestic ones are some examples of inadequate infrastructure in aerodromes across the country.
Similarly, domestic terminals lack sufficient space for airlines to open counters. For instance, the well-equipped domestic terminal at Kathmandu airport which was inaugurated just a year ago has become over crowded making it difficult for passengers to move around and airlines to open new counters.
Also, the sluggishness in constructing new international airports and terminals in Nijgadh and Bhairahawa and upgrading ailing domestic aerodromes across the country have severely hindered the movement of aircraft and passengers ultimately slowing the growth of the Nepali airline industry.
Despite the present day problems, I see a bright future for the Nepali aviation sector. The population of Nepal has reached almost 30 million and more people prefer air travel nowadays. Media reports have also suggested that the domestic air travel increased by 28 percent last year. This brings a lot of opportunities for us. Nonetheless, we need sufficient infrastructure to provide efficient and better services to travellers.
We have seen many domestic airlines closing down in the past due to various problems. What do you think went wrong with the airliners? Is it due to lack of proper policy support from the government?
There can be various factors attributing to the failure of domestic airliners over the years. Some could have closed down due to internal disputes and inefficient management while some might have failed due to poor services, selection of wrong aircraft and weaknesses in business planning and implementation, among several other reasons. However, I view that rather than engaging in the past failure of the operators, we must focus on ways to sustain and move ahead in the market and to provide better services to the passengers. Personally, I have not studied why a particular airline shut down its operations.
It is difficult to say whether the closure of companies is due to a lack of policy support from the government or not. Certainly, there are weaknesses in our policies. But many problems have arisen due to the laxity in the implementation side. I think proper implementation of existing policies is an important factor in terms of success and failure of any investment. This helps to achieve a clear and stable environment conducive to investment.
How has your personal experiences been like given the hassles you’ve encountered while receiving flight permits for new planes?
Frankly, it was quite frustrating. The events led me to think if I have done the right thing or not by investing in Nepal. I have invested around USD 20 million in this business altogether. This size of investment could have given me a red carpet welcome in any other country. It is obvious for any investor to get discouraged in such a situation. Nevertheless, I am working hoping that there will be improvements in the future in terms of doing business.
You were also associated with the IFC in the past. What differences do you think are there between observing the business and economic scenario from the IFC and getting yourself engaged in the business?
As I see it, as someone actually engaged in business, you would want the policies that have been announced, policies on which you have planned your projects should be implemented effectively. Failure of business models are also due to the non-implementation of policies. This is the main difference I have experienced in between running a business and looking at it from outside. Being situated between the two fastest growing economies of the world is definitely advantageous for us. We can benefit a lot just by following them. It is not that we need to focus only on the manufacturing business side. We can excel in the services sector also. There are lots of opportunities, but the key is in implementation of the policies.
Likewise, there are many opportunities in the energy sector. But we need to have the right approach in this regard. We have been concentrating only in hydropower investments which I think will become more challenging in the long run. The advancement in the alternative energy such as solar and wind power can make hydroelectricity unviable in the future. Various researches are being carried out in the field of alternative energy throughout the globe at present. It is highly likely that there will be a technological breakthrough someday in the near future that will make the energy produced from solar and wind resources much cheaper than hydroelectricity.
Similarly, the adverse effects of climate change such as the slow disappearance of snow in the mountains and glaciers, the main water source of snow-fed rivers in Nepal, alongside dramatic changes in the pattern of rainfall have also raised serious concerns over the historical data of water flow for hydropower projects. Investors who have been showing a lot of optimism up until now in the hydroelectricity production will start to think whether or not to invest in the sector in the coming years.
Apart from the airlines industry, are you planning on any other business venture?
Right now, I don’t have any plans to engage in any other business. After the new aviation venture becomes sustainable, then I can look to invest in other areas.
What differences can people expect from the new Shree Airlines?
The biggest difference is on our strong focus on safety, reliability of services and comfort of passengers. We won’t compromise on safety at any cost. Our passengers have been receiving the best treatment and we will maintain this in the future. I believe that success if not far away for us if we focus on these three factors.
But this is what every airliner claims. What do you base these claims on?
There is a difference between claim and implementation. We have been effectively implementing them over the years and people will see and feel the difference in our new services.
To ensure reliability, we will manage things properly that are under our control. For example, with three aircraft, we will have a planned schedule for two to two and half aircraft. This is why we did not commence flights with a single airplane. People earlier suggested that we need to start operations with a single plane and there should be a gradual addition in the fleet. We knew that it would be a bigger investment with larger risks but started operations with all three aircraft. The other way of ensuring reliability is by giving training to staff. We have given a very strong emphasis to our staff in terms of respectfully treating the air travellers even when they behave inaccurately during flights.
Are you also planning to establish a hangar at the airport?
There is lack of space to build hangars at the Kathmandu airport at present. We have a hangar for our helicopters but it is small for the jets. We will seriously think about building hangars once space becomes available.