Full-service carriers push the low-fare envelope to stay afloat

Mumbai: Through fiscal 2009, a year when oil prices scaled a record of $147 a barrel, airfares fell by almost 25% on domestic and international routes. The period also dovetailed with the onset of a recession in the US, Europe and Japan and a slowdown in the Indian economy, causing passenger traffic to contract by 10% after expanding at an annual 35% rate two years ago.
What this has done is to make Indian full-service carriers recognize the strategic relevance of the low-fare airline model in a market with air travellers turning increasingly thrifty.
Last week, India’s two largest private carriers, Jet Airways (India) Ltd and Kingfisher Airlines Ltd, took another shot at the low-fare, no-frills segments in a clear and renewed attempt to break into that market.
On Friday, Jet Airways launched a new low-fare service called Jet Konnect that will be at least 15% cheaper than the full-service option, despite already running low-fare service airline JetLite. The next day, Kingfisher announced that it was moving at least 25 full-service flights to its low-fare segment Kingfisher Red beginning 15 May.
“The intense competition on the international routes and excess capacity on the domestic routes have eroded the yields of Indian carriers,” said a senior executive from Jet Airways, who declined to be named because he is not authorized to speak with the media. “The difference between the fares offered by full-service and low-fare carriers has narrowed.”
Jet Airways, Kingfisher Airlines, Paramount Airways Ltd and National Aviation Co. of India Ltd (Nacil) run full-service operations, while SpiceJet Ltd, InterGlobe Aviation Pvt. Ltd (that runs IndiGo), and GoAirlines (India) Pvt. Ltd (GoAir) are low-fare carriers.
Full-service carriers have been pulling back flights in an attempt to trim seat capacity in the air, while their low-cost peers are increasing frequency of flights and are on course to take delivery of planes ordered.
Airlines are now also offering lower fares through imaginative promotions, both their own as well as through online booking sites.
10/05/09 P.R. Sanjai/Livemint

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Categories: Indian Aviation- In General May 2009, Low Cost General May 2009