Wednesday, November 14, 2018

Will they fare well with low-cost model?

Airlines that are full-service carriers (FSCs), facing an uncertain future, are doing exactly that: trying to experiment with the low-fare model by quietly introducing several new options that allow passengers to choose lower fares minus the add-ons, like free food and other amenities.

Jet Airways, which has been offering fare options since 2016, has gone further down the road by introducing newer low-fare categories with the flexibility of choosing seats with flight+meal or flight only. (Jet has posted a net loss of ₹1,261 crore on a consolidated basis for the quarter ended September 30.)

In August this year, Vistara, another full-service carrier, allowed its passengers the benefit of a bundle of features, claiming that it offers “freedom to choose from thoughtfully designed bundles of features and services at different price points for their preferred flight and class of service or select them à la carte.”

In comparison, state-owned Air India, which is also a full-service airline, does not offer passengers the option of paying less to fly if they buy a ticket without free food.

According to industry watchers, this is perhaps one way of dealing with the current aviation scenario in the country. Crisil Rating points out that the current fleet size in the industry is about 600 aircraft. It expects an annual addition of 120 aircraft in fiscals 2019 and 2020 alone. Further, operating cost is increasing due to the depreciation of the rupee, oil prices are increasing, the input costs are high and there are fears that any attempt to allow fares to move northward could see the passenger carriage fall. This is leaving full-service airlines with little choice but to look at new methods to ensure that they remain relevant in the domestic market.
14/11/18 K Giriprakash and Ashwini Phadnis/Business Line