Debating India

The thrills without the frills

Friday 17 June 2005

The strategy of the new low-cost airlines appears to be two-fold - attracting a new generation of passengers and enhancing occupancy levels.

The competition in India’s open skies has become so intense that the two national flag-carriers - Air-India (AI) and Indian Airlines (IA) - have also decided to adopt the low-cost strategy to cut fares and woo more passengers. If AI launched a subsidiary christened Air India Express, IA appears set to reposition its existing subsidiary Alliance Air as the low-cost option. These moves acquire significance in the context of the successful operations of the country’s first low-cost, no-frills airline, Air Deccan.

With even more private airlines set to enter the scene, the existing players are busy reworking their plans to remain competitive and retain at least a part of their market share. As on the one hand AI and IA try to finalise their fleet expansion and replacement plans, on the other Jet Airways seems to be stealing a march on them. If AI’s $6 billion plan was envisaged to be one of the largest deals in India’s aviation history, Jet has come up with a $7.5-billion order for Airbus and Boeing together.

Carving a niche

Meanwhile, Air Deccan is gradually building a niche for itself and trying to attract a new generation of passengers - those who have traditionally travelled by train, for instance. By introducing previously unimaginable fares, which bottom out to Rs. 700 for a Chennai-New Delhi flight (a limited number of seats booked on a first-cum-first-served basis), this Bangalore-based `no-frills’ airline has flown passengers who may have never taken to the skies before - holidayers, government and private sector employees travelling on leave travel facility, the young and the old alike. Air Deccan has a graded fare structure - the earlier you book, the lower the fares. This was considered one better than the `apex fares’ the others offered.

But today, be it Jet or IA, there are a variety of concessions. Unless the flight is fully booked, a passenger can hope for one rebate or the other. It is never the same fare, so long as you can book in advance, even by a day or two. That is how competitive the airlines have become. Now, in order not to lose out at both ends of the spectrum, the national carriers are trying to use their subsidiaries to take care of the low end while they concentrate on the mainstream.

But in the process, it is likely that IA and AI will end up competing with each other, perhaps for a share of the same cake. Take, for instance, the Gulf sector. For three years, the Ministry of Aviation had ruled that the national carriers would retain their monopoly status. IA was dominating the sector for years. Now Air India Express (AIE) will compete in the same sector, though may be for different destinations. When AI gets its new aircraft - which will take a couple of more years perhaps - it will seek to step up its presence in the European and American markets.

Similarly, IA, when it completes the rest of the formalities to clear its aircraft acquisition scheme, will look to enhance its share both in the domestic market and in the regional skies - South and South-East Asia.

AIE, it appears, will try to make its money in the Gulf sector in the next three years, before it can draw up plans to evolve a niche for itself. But the challenge that IA may pose may be tougher. Both in the domestic and regional markets it faces tough competition from the same private operators - Sahara and Jet. They compete for the major national metro segments and to destinations such as Colombo, Singapore and Kuala Lumpur. It is high time that IA comes up with a strategy all for itself and avoids competition from AI at least. And the way India has been opening its skies and liberalising services, it is no cakewalk for AI either. Now any country that wants to upgrade its bilateral aviation agreements with New Delhi, finds the response to be "very positive."

For the main tourist season from September to February, the Indian skies are fully open for any foreign airline to operate special flights or even charters. It is difficult to image AI competing for that kind of traffic.

If the two national carriers are going to look more at the low-end, no-frills niche, it is their subsidiaries that need the attention. The aging Boeing 737s will have to make way for new aircraft, which Alliance Air is planning to get.

Unfortunately, it cannot compete for the same segments the parent IA operates on. It is time for the Aviation Ministry to sort out this situation and empower its airlines to function professionally and commercially.

There has been some improvement in AI with the appointment of a professional as chief executive officer. Likewise, IA needs a full-time professional to lead it. It ought not to let another bureaucrat run the show.

Passenger as beneficiary

For the passengers, it is the time to relax and wait for the best offers. When there is such competition, the major beneficiary is the customer. And today, the potential passenger can choose where he wants to go, which airline to pick and the timing of the flight - night flights may be cheaper in one segment, or the domestic leg of an international service may offer a better deal. Whatever the increase in petroleum prices and correspondingly of aviation turbine fuel, the fares will go up only for the business traveller.

Leisure travel and holiday packages have come to stay and will continue to receive special attention from the airlines. After all, they want better occupancy all through the year and in all their services, which is why passengers get different offers in different sectors.

So what if you have to buy your own mineral water or sandwich, if you can fly at 20 or 25 per cent of the old fares?

The only thing the regulator must ensure is better safety and maintenance standards. There will be a tendency to exploit the available aircraft fully in order to run more services.

But this should not lead to any compromise in safety and related aviation regulations.

See online : The Hindu

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