The flight of low-cost airlines

Five years after it started, the low-cost aviation model in India is gasping for breath. Value carrier is the in thing.
Last month, Mumbai-based low-cost carrier GoAir, the only airline still offering fares of Rs 0-99, reminiscent of Air Deccan’s pricing in 2004, made a surprise announcement. It added business class to its flights. To a low-cost aviation evangelist, that would be akin to a kurta-clad communist devouring Big Mac.
Christened Go Comfort, the new section offers food and other services — the so-called “frills” — and costs more than economy class. The launch of Go Comfort is seen as GoAir’s flight into the category of value carriers — a hybrid between a low-cost carrier, or an LCC, and a full-service carrier. “GoAir wanted to study the market at every stage before planning growth,” says Edgardo Badiali, chief executive.
Still, this has increased the clamour that the LCC model cannot survive. The most vociferous is Vijay Mallya, who toyed with the idea of starting Kingfisher Airline, of which he is chairman, as an LCC, but quickly junked the idea and made it into a premium airline.
“If GoAir, which is the recent champion of low-cost carriers, is changing its model, it only proves what I have been saying for so long, that the budget carrier model cannot survive in India,” smirks Mallya.
The cumulative market share of LCCs has come down from 47 per cent in January this year to 41 per cent in September. Their average passenger load factor has fallen from 65 per cent to 54 per cent. As the aviation sector grapples with a slowdown, the sales of LCCs in September this year over August fell 37 per cent; the drop was much less at 13 per cent for full-service carriers, say travel companies.
04/11/08 Anirban Chowdhury/Business Standard

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Categories: Low Cost General Nov 2008