New Delhi: India is not a suitable country for low-cost airline operations as it not only lacks infrastructure like low-cost secondary airports but also the cost of their staff is at par with full service carriers (FSC), a study has claimed.
Also, the low fare carriers (LFCs) have to face tough competition from Indian Railways and road transport for destinations of shorter durations.
“India has very few secondary airports from which the low fare carriers could operate. Of the 127 airports with the Airports Authority of India, only 80 are operational,” aerospace expert Harmoz P Mama claimed in a study ‘Civil Aviation in India : Challenges and Prospects´.
Highlighting the poor airline coverage of smaller airports of the country, he said, “The top five airports in India handle about 70% of all domestic passenger traffic in India, which indicates poor airline coverage of most of the other airports.”
Beyond these are primarily small, crumbling airstrips with huts masquerading as terminal building which are totally unsuitable for airline operations, he claimed.
The low fare airlines in order to save their staff — particularly the pilots and engineers — from being poached have to pay salaries on a par with those of FSCs, he said.
Apart from it, low-cost airlines also have to bear the brunt of the high price of Air Turbine Fuel (ATF), which actually is a high percentage of their total costs.
The airlines also face a dearth of capable senior management, which is essential as “the LFCs require higher standard of management capabilities than the FSCs as they have to operate on tissue-thin margins”. They are compelled to appoint expatriate top management at a very high cost, Mama claimed.
The study found that more than 70% of the costs of LFCs are about the same as those for FSCs, which include aircraft purchase and lease rental costs, maintenance repair and overhaul costs, fuel costs, all airport charges and also personnel salaries.
Also there are a number of LFCs fighting for a piece of cake by flying on the same sector. As a result, LFCs end up cutting each other’s throats thus losing the opportunities to achieve economies of scale in a price sensitive market, he said.
“The LFCs have to juggle with only 30% of their overall costs to gain a cost advantage over the full service carrier — which is difficult task at the best of times,” Mama said, adding under the existing socio-economic conditions “there does not seem to be much future for the LFCs in India.”
They have suffered an estimated loss of Rs70 billion in 2008 alone, he claimed in the report and added that some of the LFCs may not survive for long.
“The potential entrepreneur should stay away from this field,” he warned.