Low cost is the new mantra in India
The United Progressive Alliance (UPA) Government has given more impetus to the civil aviation sector by pursuing its open sky policies further, allowing Indian private airlines to fly overseas, barring the West Asian sector.
What is noteworthy, however, is the growth of the domestic market which will soon see names like Air One, SpiceJet, Go and Kingfisher taking to the skies, run on global low-cost airline business models, and, often, managed by expatriate managers.
The sudden growth of low-cost carriers is to boost point-to-point travel. In the case of India, these are being promoted by companies having diverse business interests, often remotely connected with aviation.
The credit for the revival of India’s aviation market goes to the Bangalore-based Deccan Aviation that has opened up new possibilities after launching what was then a new concept. Its airline, Air Deccan, has led to an upheaval and consequent lowering of air fares.
A parallel with what is happening in the aviation market right now would be what was witnessed earlier with liberalisation in the telecom sector, where all service providers were forced to revise tariffs.
Globally, no-frills or low-cost carriers are now the much sought after option for short point-to-point trips within Europe, North America and Asia. According to the Centre for Asia Pacific Aviation, while worldwide, aircraft capacity fell by eight per cent between 2000-03, flights by low-cost carriers increased by 50 per cent. These new airlines now account for about 26 per cent of the U.S. market, 16 per cent of the European market and over 32 per cent of the Australian market. There are currently 30 low cost airlines across Asia. India is to see the launch of at least 14 such airlines — Air India Express, Kingfisher, SpiceJet, Air One, Indus Air, East West, Go Air, Visa Air, Yamuna Airways, Magic Air, Crystal Air, Paramount Airways, Skylark, and a proposed low cost service by Alliance Air, the wholly owned subsidiary of State-owned Indian Airlines.
Dramatic growth
The Indian domestic aviation market is estimated at about 19 million passengers and is expected to reach 45 to 50 million by 2010. It is further estimated that five million passengers will be added per annum for the next five years.
Added to this is the fact that corporate travel agencies are evolving their business models to enjoy the benefits of internet-based travel services. It is in such a situation that low cost airlines can play a major role in the travel and tourism industry.
So what makes low-cost carriers tick?
Air Deccan, for example, follows a low-cost business model. Its aircraft fly longer number of hours by having a faster turnaround time; have an all-economy configuration to accommodate considerably more seats than a regular airline; have only e-tickets (that are booked over the internet) and no free catering on board. Also, airport ground handling has been outsourced and many functions automated to reduce the number of employees. This leads to major savings in administration and accounting,
Across the world, low-cost carriers operate with three basic principles: a simple product — which means no free meals, economy seating, no seat reservations, no frequent flier programmes; positioning — targetting non-business and price-conscious passengers; and low operating costs.
In the Indian situation, it is quite clear that for air travel to become as commonplace a culture as in America for example, these new airlines (with their aim of wooing railway passengers) have to thrive. While the path ahead may be difficult, the low cost airline concept is one worth pursuing, especially in a situation where there may be vast numbers of train passengers who want to reach their destinations in quick time without too many comforts.
Market realities
Coming to grips with changing market realities and fierce competition, national carrier Air-India is all set to commence operations of its new budget airline, Air-India Express (AIE), which is to stimulate the international travel market, especially on the Gulf routes. (According to Civil Aviation Minister Praful Patel in the Lok Sabha recently, the number of passengers travelling to the Gulf by Air-India and Indian Airlines had increased from 20.4 lakhs or 2.04 million in 2001-02, to 22.3 lakhs or 2.23 million in 2002-03, and 24.38 lakhs or 2.44 million in 2003-04). AIE also becomes the first Indian low-budget airline to fly overseas.
AIE is scheduled to start flights this week (April 29, 2005) with a fleet of three leased 180-seater Boeing 737-800s. It is to operate 43 flights per week, of which 31 will be from Kerala. These will be to four stations in the Gulf/West Asia, viz. Abu Dhabi, Dubai, Muscat and Salalah, from five Indian stations, viz. Kochi (Cochin), Kozhikode (Calicut), Thiruvananthapuram (Trivandrum — from Kerala), Mumbai and Delhi. All flights will be of a duration of between three to four hours. The one-way fare from Thiruvananthapuram to Abu Dhabi/Dubai would start from Rs. 3,250.
As more aircraft are inducted — when Air-India’s fleet renewal programme is cleared — the number of destinations served will increase. AIE then proposes to operate flights to Bahrain, Bangkok, Doha, Jakarta, Kuala Lumpur, Kuwait, Sharjah and Singapore from Chennai, Mumbai and New Delhi. These could be in conjunction with regular Air-India flights.
An `Indian ethos’
AIE will launch its maiden flight from Thiruvananthapuram to Abu Dhabi/Muscat. The low cost airline has introduced e-ticketing (www.airindiaexpress.in). Passengers will also have the facility of purchasing their tickets through travel agents or from AIE offices. All bookings, fare quotes, refunds, change of bookings and modifications in the itinerary are totally automated and technologically driven.
The concept of a no frills airline is here to stay and will begin a new chapter in the national carrier’s history, says Jitender Bhargava, Air-India’s Director — Public Relations, pointing out that AIE will fly to “price sensitive destinations”.
“AIE’s launch is not only timely but the low cost airline is already in a position to dictate fares on the West Asian sector. AIE has recruited 62 cabin crew who will be deployed exclusively on the Kerala-Gulf flights. There will be free standardised meals and limited in-flight entertainment. The operation of AIE does not mean that parent airline Air-India will withdraw services from the West Asian market,” he adds.
The highlight of the AIE paint scheme is the tail of the first aircraft which will reflect an “Indian cultural ethos”. It has a caparisoned Thrissur Pooram elephant trunk on the starboard and a Pushkar camel on the portside. The other aircraft will also have unique Indian designs.
In conclusion, it is certainly an exciting time ahead for the air passenger. With the growing number of air travel options, the customer is bound to be king.