Mumbai: More than two months after it started flying non-stop between Mumbai and New York, Air India’s service is still running at low load factors, a direct consequence of its relatively-expensive tickets and an advertising campaign that kicked off late, experts in the trade say.
Load factor is a measure of the number of passengers on a plane expressed as a percentage of seats.
The airline, operated by state-run National Aviation Co. of India Ltd, or Nacil, has still not managed to fill even half the capacity on the Boeing Co.-made 777-200 LR aircraft in the last 10 weeks since it started the service on 1 August. The average loads on the 238-seater plane have been around 107 seats, equivalent to 45% load factor, on the flight bound to New York, and 87 seats back (36%), said a senior Air India official, who did not want to be quoted.
The airline has set a target of 75% load factor in the first year of operation and expects to fly its plane full in the coming ‘busy season’ from mid-October through January.
A file picture of Air India’s Boeing 777-200 LR at the Chhatrapati Shivaji International Airport in Mumbai. The airline has still not managed to fill even half the capacity on the aircraft in the last 10 weeks since it started the Mumbai-New York direct service on 1 August
Air India’s numbers lag those of its rivals. Delta Airlines, on its Mumbai-New York direct flight, has an average 70% load factor, said a company executive, who requested anonymity since he can’t be quoted by the media.
Jet Airways (India) Ltd, which launched a one-stop service to the US five days after Air India’s non-stop service, has an average load of 65%, despite a two-hour layover at Brussels.
According to Air India, it is inaccurate to compare its service with Jet Airways’ since it is not a direct flight, or with Delta’s, which was started nearly a year ago. Also, pointed out Jitender Bhargava, Air India’s executive director for communications, around 500 seats have been added on the Mumbai-New York route since August and demand is laggingcapacity.
Pricing is a factor, too. Air India had opened bookings with fares more than 30% higher than the industry average on the sector, which were later pared because of slow bookings. Four days before its first Mumbai-New York direct flight, Air India lowered its economy fare 37% to Rs50,700 per seat for a round trip ticket (excluding taxes, which can run to more than Rs7,000) from its earlier rack rate of Rs80,700. Its business class fares were also lowered 40% to nearly Rs1.6 lakh from Rs2.67 lakh. A first class ticket today costs Rs3.58 lakh, 22% down from the earlier Rs4.59 lakh fare.
Air India tickets are now even cheaper. An economy ticket will set a passenger back by Rs47,593, including taxes, and by Rs193,293 in business class.
Still, the carrier’s economy fare is about 13% more expensive than comparable tickets on Delta, which sells its tickets at Rs42,051, including taxes. Continental Airlines, which started a direct service between Mumbai and Newark, near New York, sells its economy-class tickets at Rs43,271. Business class tickets on the Delta flight is an all-inclusive Rs191,897 and on Continental, it is Rs185,740.
Bhargava defended the slight premium on Air India fares. “We can fill our airplanes by dropping fares, but we want to position ourselves as a premium product. We are having a load factor of above 50% in the first and business class seats,” he said. “Economy class is a price-sensitive segment and it will take its own time to pick up.”
Industry experts hold a belated marketing campaign also responsible for the low load factor. “Generally, leisure travellers book tickets much in advance, and since advertising was delayed, Air India lost out on numbers,” said Ajay Prakash, general secretary, Travel Agents Federation of India, or Tafi.
Air India has a Rs20 crore advertising budget for the New York service for six months. In time for the inaugural flight, the carrier had spent $100,000 (nearly Rs40 lakh) to advertise in New York’s Times Square. This was in addition to print advertisements in leading publications such as The New York Times and The Wall Street Journal and a similar blitz in India.
Tafi’s Prakash added that Air India’s larger challenge has to do with communication. “The reason could also be people’s perception that Air India still uses old aircraft and has some problems in scheduling. Although Air India is not inferior by any means compared with its peers, it needs to publicize this fact,” he added.