Mumbai: Kingfisher Airlines Ltd is reconfiguring its fleet to accommodate more seats even as the traditional lean travel season gets over by the end of March.
India’s second largest airline by passenger carried also plans to fly more international routes without adding planes to its fleet.
The plan assumes significance as in a weak travel season, carriers are under pressure with brent crude crossing $100 per barrel to hit the highest level since mid-2008. Jet fuel, the single biggest expense for carriers, accounts for about 40% of their operating cost.
State-run oil firms have increased jet fuel prices by 15.48% since 1 January and airline stocks have lost heavily since then.
The country’s largest airline Jet Airways (India) Ltd, too, is converting one-third of its domestic flights into the all-economy service Jet Airways Konnect to cut costs, increase revenue in a lean season, and beat competition from low-fare rivals.
Jet Airways will create 20-25% extra seats following this, although the yield of every plane will reduce by 10-15% with the loss of the higher-priced business class seats.
An investor presentation by Kingfisher Airlines in March said the airline has applied to the Directorate General of Civil Aviation and the ministry of civil aviation for traffic rights on several international routes using its existing fleet.
A Kingfisher Airlines executive, requesting anonymity, said the airline will reconfigure all of its Airbus SAS fleet to dual class—with economy and first class. “There were half a dozen Airbus planes that were all economy. Now we will introduce first class seats on it. At the same time, we will reduce number of first class seats to 20 from 32,” he said. This will allow the airline to have at least 150 more economy seats. “This is equal to having a free plane without lease rentals or other expenses,” the airline official said.
The airline will increase the frequencies on the existing international routes to increase the flight utilization rate, he added.
The reshuffle of aircraft layouts is applicable only to Kingfisher Airlines fleet, not Deccan Aviation Ltd. Kingfisher Airlines, owned by liquor baron Vijay Mallya, in 2007 bought Deccan Aviation.
The reshuffle will bring many benefits for Kingfisher Airlines, industry analysts said. It will help the airline earn more as six to seven planes will now sport highly priced first-class seats. On the other hand, reduction in the number of such seats in other planes will reduce the chances of flying with vacant first-class seats.
“This sounds like a well-planned reaction by Kingfisher Airlines to market needs,” said Craig Jenks, president of Airline/Aircraft Projects Inc., a New York-based air transport consulting and advisory services firm.
On 23 February, Kingfisher Airlines said in a statement that one of its Mumbai-New Delhi flights will be operated using a dual-class cabin. Mumbai-New Delhi is a key route in terms of revenue for airlines.
“It’s good for Kingfisher Airlines as it is tweaking its business model according to the demand. The key thing for an airline is operational flexibility to react to the changing demands,” said Rishikesha T. Krishnan, professor of corporate strategy at the Indian Institute of Management, Bangalore, who tracks the aviation sector.
The investor presentation also said the airline renegotiated contracts with ticket booking software companies to cut down cost and started charging for food on its low-fare division Kingfisher Red, formerly Air Deccan.
“Ten planes have come back to service out of the 14 grounded since September 2010 and (the) balance four aircraft will be inducted to service over the next few weeks,” it said.
An executive from rival Jet Airways said it’s a right strategy to have premium class footprint in all sectors and claimed Kingfisher Airlines is following his airline’s strategy. He did not want to be named.
The Kingfisher Airlines executive countered this, saying his airline never had first class seats in some of its planes, while Jet Airways removed its business class to beat the lean season.
Front-end seats—business and first—are critical for an airline in increasing profitability as business-class seats are typically six times more expensive than economy seats, while first-class fliers pay 10 times the price of an economy class ticket.