Low-cost but high profit

With all the focus on Air India, it is easy to miss the success story that Air India Express — the low-cost cousin of the national carrier — has been scripting over the past few years.

In 2014-15, AI Express had operating revenue of ₹2,616 crore and an operating profit of ₹ 330 crore. For 2015-16, it has budgeted business worth nearly ₹2,800 crore and is expected to report an operating profit of around ₹800 crore.

Of course, historically low aviation fuel prices have helped. But that is not the only reason. AI Express has re-imagined itself by becoming more nimble and listening closely to what its fliers want. One example is its new plan to allow passengers between India and the Gulf to pre-book meals from this Tamil New Year’s on April 14.

Not only will passengers get a chance to pre-book meals but will also have access to more direct flights between the two destinations.

These moves are in response to the demands of the market, says Shyam Sundar, Chief Executive Officer, Air India Express .

The airline, which offers free meals on its flights, is also looking at selling largely non-vegetarian meals, short eats and alcohol.

The catch here though is that these will only be available if ordered online.

“The passenger profile is changing. We are getting requests from passengers saying why don’t you charge for a meal like the others and give us more than what you are offering?” Sundar says.

The airline has already devised some fresh menus. As it already offers free meals to its passengers, the price paid for meals will be more reasonable than what other low-cost airlines charge.

“The rates are very sporting because we are discounting the value of the free meal that we anyway give. We do not want to make any extraordinary profit here so we have reduced the cost of the free meal from what we would have priced the meal otherwise,” says Sundar.

The airline has already done some testing as it wants to make sure that passengers who pay for their meals get what they are looking for. Meanwhile the free meals too will continue.

\These changes come at a time when the airline, which has almost 65-70 per cent of its capacity tied up between Kerala (including Mangaluru) and the Gulf region, is trying to get a more pan Indian footprint with operations from Lucknow, Amritsar, Jaipur, Pune and Varanasi to various destinations in the Gulf.

The airline will also soon start operating from Delhi and Mumbai to Dubai, apart from connecting Mumbai to Sharjah.

It is also taking over the Delhi-Abu Dhabi operations from Air India. Flyers opting for Air India Express on these new routes will get more convenient timings.

Hence, the Mumbai-Dubai and Delhi-Dubai flights are scheduled to depart from India around the middle of the day.

“Given the time differential if you leave Delhi at 1 pm India time, you will get into Dubai at 2.30 pm local time and get your monies worth on the hotel,” Sundar says. Helping it here will be the at least six more aircraft which are scheduled to join the fleet by November this year.

The main target of the low-cost airline is the outbound tourist market which is growing at a rate of about 14 per cent annually. Currently 18 million tourists travel outside the country every year.

“If anyone needs to put in money you need to put it on outbound tourism. There is prosperity and it is visible,” Sundar says. On time flights is something that Sundar is pinning his hopes on. Hence, the airline is keen to ensure that its flights out of India are on time.

“Passengers have already bargained for this one flight going on a Wednesday so if that flight goes on Wednesday as assured they do not ask for anything more. If you are able to score on on-time performance and you are better than competitors then frequency is not important,” Sundar argues.

The move seems to be paying off. On the Cochin-Dubai sector, Sundar claims that AI Express has a higher passenger load factor than it did in 2014-15 despite competition from both IndiGo and SpiceJet. Incidentally, the private sector low-cost airlines were not operating on this route the previous year.

One thing’s for sure though — if AI Express continues to adapt and change to the needs of its customers, while offering a reliable service, it needn’t worry too much about its growth.

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