New Delhi: As a full-service carrier, Tata-Singapore International Airlines, or Tata-SIA, faces an unusual challenge. Indian full-service carriers Jet Airways and Air India are mired in losses because they sell tickets at almost the same price as low-cost carriers like IndiGo and SpiceJet, though their costs are as much as 50 per cent higher. Elsewhere in the world, there is a difference of at least 50 per cent between the two fares. If this is the established business model, is there any hope for the new airline? Also, won't its fares clash with Tata Sons' low-cost carrier with AirAsia? Tony Fernandes of AirAsia has acknowledged there could be some cannibalisation between Tata-SIA and AirAsia in India.
Tata-SIA can get higher yields than low-cost carriers because it will have business class seats which it can sell at a premium. According to industry estimates, business class seats typically account for 8 to 10 per cent of the total domestic airline capacity but contribute 15 to 20 per cent of its revenue. The average business class fare is three to six times that of an economy seat. In other words, it means 18 business class seats would give you the same revenue as at least 54 economy passengers. That obviously increases the average yield per passenger. This makes it a lucrative business proposition if leveraged effectively.
14/05/14 Surajeet Das Gupta & Sharmistha Mukherjee/Business Standard
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Tata-SIA can get higher yields than low-cost carriers because it will have business class seats which it can sell at a premium. According to industry estimates, business class seats typically account for 8 to 10 per cent of the total domestic airline capacity but contribute 15 to 20 per cent of its revenue. The average business class fare is three to six times that of an economy seat. In other words, it means 18 business class seats would give you the same revenue as at least 54 economy passengers. That obviously increases the average yield per passenger. This makes it a lucrative business proposition if leveraged effectively.
14/05/14 Surajeet Das Gupta & Sharmistha Mukherjee/Business Standard
