Companies warm up to budget carriers

New Delhi: The economic slowdown has made companies look at low-cost carriers (LCCs) with new respect. As a result, corporate travellers now constitute over 35 per cent of the traffic on LCCs, up from ten per cent a year ago. This has caused LCCs to record passenger load factor in excess of 70 per cent, though overall traffic has fallen ten per cent in the last one year. Full-service carriers, in contrast, are known to have lower PLF of around 60 per cent.
This, according to the Centre for Asia Aviation (CAPA), an aviation consultancy, will help the country’s LCCs achieve cash breakeven in the third quarter of this year. This of course assumes the trend of corporate travellers switching to LCCs will continue and jet fuel prices will remain under $50.
CAPA has pointed out that while their fares are 30-40 per cent cheaper than full-service carriers, LCCs offer 90 per cent of the service which their higher-priced rivals give.
LCCs have clearly shifted the focus of their strategy to woo corporate customers. SpiceJet said that about 30 per cent of its passengers are now corporate travellers and about 70 per cent of them fly frequently and are regular passengers, which makes them more attractive.
SpiceJet has set up a special team to deal with corporate travel and is offering discounts to companies which give large volumes of business.
One key requirement for corporate travellers is a pan-India network, and that has been taken care of by the recent expansion in LCC capacity. LCCs increased their capacity by around ten per cent in 2008-9 which includes new aircraft, better utilization of existing aircraft and expansion of operations to newer locations. During the same period, the overall capacity in the country has fallen 12 per cent primarily because full-service carriers have cut flights.
More important, full-service carriers have withdrawn flights in peak hours and these slots have been taken over by LCCs.
09/05/09 Surajeet Das Gupta/Business Standard

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Categories: Low Cost General Mar 2009