Domestic carriers find ways to cut costs, see long-term gains

Mumbai: After years of intense competition and fast growth, domestic airlines are taking advantage of the current slowdown to gear up for the long term.
Record jet fuel prices this year have already forced airlines to cut operational costs, rationalize routes and raise fares, measures that are unlikely to be reversed in a hurry. These carriers are now digging for avenues that can add substantial earnings even if good times return.
Air cargo freight, for instance, is a key but mostly downplayed source of ancillary revenue for companies such as state-run National Aviation Co. of India Ltd, or Nacil, which runs Air India, as well as for Jet Airways (India) Ltd, Kingfisher Airlines Ltd and SpiceJet Ltd.
“In June alone, we have uplifted in excess of 1,320 tonnes that has generated revenue of over Rs3.5 crore,” said Samyukth Sridharan, chief commercial officer of the low-fare airline SpiceJet, which started ramping up its cargo operations in July. “The domestic cargo industry is estimated to grow over 15% annually. We are confident of touching a magic figure of Rs100 crore annually within the first three year of cargo operations.”
A medium-size passenger plane can carry 2-3.5 tonnes of cargo, but domestic airlines have for long ignored this non-core option because it can delay their turnaround time in airports.
On a smaller scale, domestic airlines are looking at on-board shopping, on-board advertising, in-flight contests, home delivery of tickets, travel insurance and advertising on boarding passes.
SpiceJet, for instance, plans to start car rental services from airports for its passengers, and provide in-flight entertainment with non-fixed video screens for a charge.
With airlines hiking fares, the number of people travelling by air declined to 3.04 million in July, down 12.65% from a year ago.
Though domestic jet fuel rates were cut 16% last week, these airlines, which had pitched their fares at unsustainable low levels amid intense competition, are now reluctant to lower ticket prices.
These carriers are even re-negotiating deals with corporate houses to raise the value of their offers to them. Aimed at bulk sales, airlines offer tickets to corporate houses at special rates.
04/09/08 Livemint

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Categories: SpiceJet Sep 2008