BackAs passenger traffic improves, low-fare services take back seat
As passenger traffic improves, low-fare services take back seat
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Mumbai: Airlines are slowly scaling back low-cost services and expanding full-service operations as economic growth accelerates and companies lift travel restrictions imposed on executives to cut costs.
Jet Airways (India) Ltd, the country’s largest airline by passengers carried, is converting at least 63 flights under low-cost brand Jet Airways Konnect into full-scale Jet Airways flights.
Kingfisher Airlines Ltd’s low-fare service Kingfisher Red is offering services usually associated with premium travel to front-row passengers, an airline official said.
Air India, run by the state-owned National Aviation Co. of India Ltd (Nacil), has deferred the introduction of a low-fare carrier for domestic routes, a senior official said.
Both the Kingfisher and Air India officials did not want to be named.
Full-service flights offer economy class and the costlier business or first class and provide special meals and extra leg room for passengers travelling in the latter.
Airlines had started relying more on low-cost operations, which are typically without any frills, during the economic slowdown that followed the global financial crisis of 2008. Jet Airways introduced Konnect in April 2009, offering tickets 10-15% lower than the economy fares of the full-scale carrier.
The airline also introduced a semi-business class brand, Jet Airways Konnect Select, in May 2009, in which the tickets were 20-25% cheaper compared with the usual business class.
Kingfisher Airlines shifted many flights under Kingfisher Red to beat the slowdown.
But the trend seems to be reversing.
“We have made planned changes and several Jet Airways Konnect flights have now been changed to ‘full-service’ Jet Airways flights between 1 October and 28 February, and 16 April 2011 and 30 June 2011," Sonu Kripalani, vice-president of passenger sales in India at Jet Airways, wrote in a 6 September letter to travel agents.
The letter also informed that the flights and their new fares had been updated in global distribution systems (GDSs), which allow passengers to book tickets between any destinations from anywhere in the world.
The converted flights are mostly on metro routes, such as Mumbai-Delhi, Kolkata-Delhi, Chennai-Mumbai, Delhi-Bangalore, Bangalore-Kolkata, Pune-Kolkata, Mumbai-Kolkata, Bangalore-Mumbai, Hyderabad-Mumbai and Delhi-Chennai.
The move will shrink the share of low-fare flights to 60% of the total capacity from the present 75%.
Nikos Kardassis, chief executive officer at Jet Airways, said the airline wants to remain flexible. “If the market demands more full service, we will convert more flights."
Full-service operations are likely to boost profitability of carriers, as revenue from business and first-class fares is much higher than economy seats.
“There is a clear sign of resurgence in the economy, corporate travel and premium travel," said Deep Kalra, chief executive and founder of MakeMyTrip India Pvt. Ltd, an online travel firm.
“In case of Jet Airways, the airline wanted to retain its leadership in the full-service segment. It will retain its Jet Airways Konnect to compete with other low-fare carriers," he said.
Kalra said fares will increase as airlines turn to full-service operations, but will stabilize soon. “Significantly, all airlines are planning to induct more capacity with demand outstripping the supply."
In its July-August Airlines Financial Monitor report, the International Air Transport Association (Iata), a lobby for international airlines, said the average one-way economy fares are now 15% up on last year’s low at $286 (Rs 13,327.6).
“Unlike travel volumes, fares are still below their early 2008 peaks by 5% in the case of economy fares. Premium fares had risen by a lesser 10% by mid-year over their 2009 lows. More importantly, they remain some 20% below pre-recession highs. There is much volatility, but also signs that stabilizing load factors, and therefore supply-demand conditions, are slowing the recent rise in fares," Iata said.
The first-class category in Kingfisher Airlines is also enjoying better occupancy rates, the airline executive quoted earlier said. Like Jet Airways, Kingfisher also plans to be flexible and increase full-service operations wherever it sees demand.
The official said this will help the airline sell tickets on GDS and code-share with any international airline.
Code-sharing allows an airline to sell connecting-flight tickets of another airline. Kingfisher Airlines has a code-sharing agreement with British Airways Plc and hopes to be part of oneworld—a global grouping of airlines that have code-share arrangements with each other—by next year.
“This change is primarily because the corporate houses (are) lifting travel restrictions," he added.
Adil Malia, group president (human resources), Essar group, a Mumbai-based conglomerate with interests in steel, oil, power and shipping, said its senior management flies business class for business trips.
“Life is back to normal," said Malia. “Managing cost is not actually a recession issue, but it brought an occasion to review certain cost that a company should manage."
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