India’s aviation industry is in the grip of a peculiar trend, which if it gains traction, portends a complete makeover for the sector, while attracting thousands more to take flight.
Low-cost airlines such as Indigo and Spice-Jet are making profits while traditional full-service airlines like Air India, Jet Airways and Kingfisher Airlines are deep in the red, a trend experts believe marks the beginning of budget airlines’ domination of Indian skies.
In the June quarter, Jet Airways lost Rs 225 crore and Kingfisher Airlines lost Rs 243 crore.The national carrier that ran up losses of Rs 7,200 crore last year is yet to report the first quarter numbers.Howevr, SpiceJEt and Indigo have reported profits for the quarter.
Sure enough, the full carriers are now betting on no-frills .Jet Airways will transfer two-thirds of its domestic operations into Jet Konnect, the low-cost service it launched in May. Kingfisher has trimmed its fleet from 89 to 69 and plans to expand the operations of Kingfisher Red. Air India said it will become a no-frills airline.
“There was time when Jet and Kingfisher both were against low-fare model in the country.But, now they have realized that India is a low-cost market,” said GR Gopinath, the man who introduced the concept of budget airlines into the country six years ago by launching Air Deccan.The airline went in to become the country’s largest domestic carrier before being acquired by Kingfisher in June 2007.
Analysts say the market opportunity in huge, particularly because just 3% of India’s population fly now and low fares are the only way to attract more passengers.
India accounts for 2% f the global air traffic and 17% of the global aviation industry’s losses, almost all of it attributed to full service carriers, according to Centre for Asia pacific Aviation , a Sydney-based aviation research firm.Capa experts the combined debt of the Jet, Kingfisher and Air India could reach Rs 45,000 crore by the end of this fiscal.
So what makes low-cost carriers fly high while full carriers get grounded? “It’s all in the business model. We kept fares low, steading increasing our load factor,” says Spice Jet CEO Sanjay Aggarwal, which reported Rs 26 crore profit in the quarter ended June.
These are low-cost airlines and as the tag suggests, they keep their costs very low. They don’t believe in on-board entertainment or window blinds. They have single passenger class and sell tickets directly.
In the last quarter, they managed to notch up a profit flying with a modest 70% of their seats occupied .The full service carriers ,say industry experts, are bleeding heavily despite 65% occupancy.
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