Mallya's sortie can make LCCs face the heat

New Delhi:The Kingfisher-Air Deccan deal has many rivals flummoxed with the battle for market share among the low-cost carriers (LCCs) expected to intensify in the coming months. With the Jet-Sahara, Kingfisher-Air Deccan, and the Air India-Indian combines garnering a combined market share of almost 85%, the smaller LCCs such as SpiceJet, IndiGo, and Go are set to face the heat.
Experts feel that the next phase of consolidation in the aviation industry would be in the LCC space. Already the LCCs are talking M&As. “Paramount is already scouting for acquisitions in the aviation space,” M Thiagarajan, MD, Paramount Airways, told ET.
While the presence of three formidable combines is bound to constitute a serious threat for the LCCs, they are seeking solace in the fact that consolidation is accompanied with lowering of costs and improvements in yields. “It is better to have a well-funded competitor than a cash-strapped rival who is likely to make irrational moves,” said Siddhanta Sharma, CEO, SpiceJet.
The days of one-rupee tickets or selling much below their costs are numbered.
Agrees Bruce Ashby, president, IndiGo. “This may lead to modest improvement in yields as airlines focus more on profitability than market share,” he said.
Jeh Wadia of Go Air insists that having a stronger rival in Air Deccan, the largest low-cost carrier with over 18% market share, would have no impact on his operations.
Interestingly, another small but niche player in the market, Paramount, which focuses on the Southern markets, feels that the airline’s product offering does not compete with that of Air Deccan.
01/06/07 Sudipto Dey/Economic Times

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Categories: Air Deccan Jun 2007, Kingfisher Jun 2007