Low-cost carriers will survive, says Gopinath

New Delhi: Dismissing fears about the survival of low cost carrier (LCC) model in these turbulent times, the man who launched this concept in India —Capt Gopinath—has said that this model is best suited to outlast the tough times.
He added that even after Kingfisher and Air Deccan’s merger is complete, UB Group chief Vijay Mallya has told him that two brands — one for low-cost-low-fare and other for premium service airline — would remain under the common umbrella of Kingfisher.
In the past few months when price of crude, and correspondingly jet fuel, has skyrocketed, industry leaders had predicted the death of LCC model in India since the country does not have any separate low cost airport for these airlines and all carriers have to pay the same for using the facilities. But Gopinath refuted these fears. ‘‘The low cost model becomes more valid in today’s situation as every airline has to cut cost to survive. Today Air Deccan’s per km cost of flying is about Rs 2.20 and a leading full service airline’s cost is nearly Rs 5. Each time when jet fuel gets dearer, cost for both rise but the difference remains. So the full service ones are also going prune costs any which way,’’ he said.
As a result, an LCC can break even by offering average fare of about Rs 6,740 with an 80% load factor while a full service would require average fare of nearly Rs 12,000 on an Airbus A-320.
18/06/08 Saurabh Sinha/Times of India

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Categories: Deccan Jun 2008, Low Cost General Jun 2008