Saturday, June 08, 2019

Why India is a ‘low-fare carrier’ market

Given that people in India are extremely value conscious, it’s no surprise that penetration of low-cost carriers (LCCs) in the domestic aviation market is arguably the highest in the world. LCCs offer a no-frills experience that target flyers willing to sacrifice comforts such as free food.

In April this year, LCCs in India led by IndiGo captured nearly 80% of the domestic aviation market, according to data from the Directorate General of Civil Aviation (DGCA). IndiGo alone commanded 50% of the market.

In the U.S., home to the world’s largest LCC, Southwest, the market penetration of LCCs is about 31%, according to an article published by Anna.aero, an aviation news and analysis website. Incidentally, Puerto Rico in the Caribbean Islands has an LCC market penetration of 58.6%, the highest in the Americas.

In Europe, Macedonia has the largest LCC penetration at 65%, followed by Slovakia (62.3%), Hungary (61.7%) and Romania (60.7%), according to another Anna.aero report.

Closer to home, in Southeast Asia, aviation consultancy firm CAPA estimates that Indonesia, Thailand and Malaysia have a domestic LCC market penetration of 60%, 56% and 53%, respectively.

Amar Abrol, former CEO of AirAsia India, in a recent interview with Fortune India, said that LLCs are all about “the volume game”. “That is why the back of the plane [economy class] has more people than the front of the plane [business class]. Simple logic.”

Just 11 years ago, full-service airlines (FSAs) in India such as Jet Airways (grounded for want of funds to run operations), Kingfisher Airlines (now defunct) and Indian (now Air India) accounted for over 50% of the domestic air travel market. Unlike LCCs, FSAs offer free food and beverages, in-flight entertainment, and other amenities.
08/06/19 Anshul Dhamija/Fortune India

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