The Hindu Business Line : Low-cost carriers viable, say Airbus, others

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Bangalore Feb. 8 Low-cost carriers (LCCs), which are struggling to survive in the industry, have found a critic among the unlikeliest of places.

Boeing, which sells aircraft to some of these LCCs, has slammed a few of them for selling free tickets and even those which price the fares as low as a few hundred rupees. "This won't work in the long run," the Boeing's Senior Vice-President for sales, Dr Dinesh Keskar, told Business Line.

But Boeing's competitor, Airbus was quick to come to the rescue of the LCCs. A spokesperson for the company said their aircraft, especially the A320s, have turned out to be extremely viable for these LCCs. "Airlines like it because they buy it," the spokesperson said.

Dr Keskar pointed out that those that sell free tickets should not factor those seats as part of the load factor. "Non-revenue seats are not part of the load factor," he said. He said as per a survey, an hour of flight in India costs around Rs 2,200 per seat which is just good enough for the airline to break even.

Hence, if an airline sells tickets for some of the seats at less than that fare, other seats should be sold at a much higher price than Rs 2,200. "But some of the LCCs are not able to sell them at a higher price," he said.

He, however, defended low-cost carrier SpiceJet whose fleet consists entirely of Boeing aircraft, stating that its load factor was as high as 90 per cent and hence a few tickets at lower prices does not affect the viability of the airline.

"Yield, load factor and number of seats are the factors which determine the viability of an airline," Dr Keskar said.

Capt. G.R. Gopinath, Managing Director of Air Deccan, which in fact kick-started the era of low fares in the country, said no airline wants to run under losses. "We sell at extremely low fares during off season or to promote certain routes," he said.

"Seats area a perishable commodity. We can't hold on to them just because we don't want to sell them at low price," the Indian Chairman and Managing Director, Mr Vishwapati Trivedi, said.

The Centre for Asia Pacific Aviation (CAPA) Chief Executive Officer for Indian sub-continent and the Middle East, Mr Kapil Kaul, said currently there was a gap of around $15 per seat between cost and revenue for the LCCs. "If the LCCs are able to tweak their fares a little bit, they can be viable," he said though he too held a candle for the LCCs.