Low-cost travel needs govt boost3 min read . Updated: 13 Sep 2010, 10:10 PM IST
Low-cost travel needs govt boost
Low-cost travel needs govt boost
Low-cost aviation is all about efficiency and innovation. I took a flight a year ago from Toulouse in France to London on the European low-fare carrier Ryanair. You go from an alternative airport and not the main Toulouse airport. There the airlines pay no landing or parking charges. On the contrary, Ryanair gets €5 (Rs 297) per passenger from the local municipality because its customers are catching a flight from an airport they wouldn’t have preferred. I remember the fare was €27, there was a tax of some €19 and then because I had baggage, they charged €15. The moment you have a bag to check in, it needs more of the airline’s resources and the fuel burn increases. So you bring in discipline and cut wastage by charging a passenger with more baggage. You can’t exit a Ryanair website without travel insurance. They will ask, “do you want a hotel room?"
In the low-cost space, Ryanair is No.1, Brazil’s Goal is very good, and there is AirAsia of Malaysia. I think in India, SpiceJet and IndiGo are both doing a great job. But I think in the pricing, because of the cartel they have got, which has still not come under the Competition Commission of India, they are all putting a minimum price on air fare. That, I think, is totally against the low-cost model of Ryanair and AirAsia—of fierce competition where the customer benefits. For long-term growth, the filling up of the plane is very important. Ryanair has 200 aircraft, it flies 60 million passengers, and a quarter of all Ryanair seats are free plus tax and it has been the most profitable for 10 years. So I think our low-cost airlines are really good, both SpiceJet and Indigo, but they still have not got their pricing right because they are part of the Federation of Indian Airlines and are setting a minimum price, which is actually detrimental to the long-term growth of the industry and to their own business model.
Since 2000, the most important change is that airlines have realized they have to be absolutely cost-conscious, whether it is full-service or low-cost—probably with the exception of Kingfisher Airlines, which got carried away by frills. Jet started JetKonnect without business-class seats. Meanwhile, if you look at the price, when I started Air Deccan in 2003, the oil price was one-third the current level at around $20 ( ₹ 926) a barrel, salaries were one-third, airport fees were half, Bangalore-Delhi economy fare one way was ₹ 12,000 on Indian Airlines, ₹ 12,100 on Air Sahara and ₹ 12,200 on Jet. Today, in any airline including Jet and Kingfisher, you can get a fare of ₹ 3,000-4,000 if you buy the ticket 15-20 days in advance. That is a fact. And IndiGo and SpiceJet are in profit, though costs have risen three times and fares have come down 25%. Clearly, the low-cost model works and the full-service carriers realize this.
Only 0.6% of India travelled by air when Deccan started. Today, around 4% of India travels by air—we are selling 50 million tickets in a country of 1.1 billion. The numbers remain dismal. In Ireland, with a population of five million, 25 million tickets are sold every year. Even in China, some 100 million travel by air. What does it mean? It means that if at all there is to be a future for all of us, it is by expanding the market. If you are boasting you will be a superpower, the government needs to have a strategic vision policy for aviation, for airport infrastructure. It is not about travel, it is about the economy itself. For us to have an airline of the scale of Ryanair or Southwest, I think it will need one more Air Deccan to happen. It will definitely happen, some or the other entrepreneur will start it.
G.R. Gopinath started India’s first low-cost domestic airline Air Deccan and is the author of Simply Fly: A Deccan Odyssey published this year.