Epitaph time? Not yet, for full-service airlines

Bangalore/Mumbai: With the three full service carriers (FSCs) -- Kingfisher Airlines, Jet Airways and state-owned Air India -- planning to slowly move a large part of their capacity to low fare segment, the airfield in that space has now been left to just one player --- Chennai's business class airline Paramount Airways.
Time to write the epitaph of the legacy carrier?
M Thiagarajan, managing director of Paramount, doesn't think so.
"There is nothing wrong with the FSC business model as such; they (Jet, Kingfisher and Air India) have not been able to sustain it because they went in for explosive expansion," he said.
Unlike his peers, Thiagarajan has no plans of tweaking his business model to remain airborne.
Interestingly Paramount has been logging a seat factor of over 80% every month -- that is, only one in five seats is going empty, and that too, in an all-business class service -- it does not have normal fare seats.
True, Paramount's market share is still very small after almost four years of operations. In June, it had a 2% share compared with Kingfisher and Jet's 24.4% and 16.6%, respectively.
"I have intentionally gone for slow capacity addition and ruthlessly managed costs. This has worked for me," Thiagarajan said.
Samyukth Sridharan, chief commercial officer of budget carrier Spicejet Ltd, also believes that it is not a case of wrong business model for the FSCs, which are flying to low fares to keep afloat.
Sridharan said SpiceJet's cost per available seat kilometre (CASK) was the lowest in the industry at Rs 2.30. Jet's was more than twice that in the first quarter at Rs 4.79.
He said such a high cost structure will not allow Jet to compete with budget carriers.
This is the reason why low cost airlines are not worried about FSCs entering into their segment.
A senior executive of another low-cost airline, who did not want him or his company to be named, also brushed off such apprehensions.
We have seen a 7.5% growth in passenger traffic in the last quarter and are expecting a double-digit increase in the current quarter.
12/08/09 Praveena Sharma & Ramiya Bhas/Daily News & Analysis

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