Why some airlines are more profitable

New Delhi/Chennai: Flying lighter aircraft, operating several flights between fewer cities and keeping a tighter rein on costs could probably explain why the low-cost carriers (LCCs) in India are able to report better financials than full-service carriers, despite having to work in the same operating environment of high fuel costs and airport charges.
Consider the figures: The two low-cost airlines IndiGo and SpiceJet reported profits of Rs 550 crore and Rs 61 crore in 2009-10. On the other hand, Kingfisher Airlines reported a loss of Rs 1,647 crore and Jet Airways reported a loss of Rs 420 crore. Again, in 2010-11, while Jet and Kingfisher posted losses, SpiceJet and IndiGo remained profitable.
Industry analysts believe that LCCs run tighter ships and thus are more profitable. Take, for example, the no-frills model of a low-cost airline. Since it does not provide a hot meal service, the aircraft has none of the equipment required to keep the food hot. It also does not carry any cutlery. All this lightens the aircraft, which in turn leads to less fuel burn. And given that fuel in India is at least 50 per cent more expensive than globally and one of the biggest expenses, these measures help.
LCCs also keep their aircraft utilisation rates high, by cutting turnaround times and using their space better. On an average a low cost airline can seat between 160-190 passengers as compared to about 150 by a full service aircraft. The pure low-cost model also requires lower staffing.
16/11/11 Business Line

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Categories: Indian Aviation- In General Nov 2011