Cash-strapped airlines fly towards low-cost business model

With financial problems plaguing full service airlines in the country, airlines are betting on the low-cost model to rejuvenate their account books.

Air India and Kingfisher Airlines have been in losses for the last several quarters, while Jet Airways also slumped into net loss for the quarter ended June 30. All the three airlines have now decided to focus on the low-cost carrier model.

The airline plans to start its low-cost services by winter with 15 turbo-prop aircraft. The national carrier plans to convert its subsidiary Alliance Air into a low-cost carrier but it is still awaiting clearances from the Director-General of Civil Aviation (DGCA).

Plans

Plans also include induction of 40 aircraft, out which 30 will be turbo-prop aircraft, in its fleet for low-cost domestic operations. Air India also plans to induct 40 aircraft for its low-cost international arm Air India Express by 2019 and the planes are likely to be leased.

Cash-strapped private airline Kingfisher Airlines has started to concentrate on low-cost model. The airline has also started changing its domestic flights and installing an all economy configuration.

Nearly half of the airline's 66 fleet aircraft is meant for domestic short-haul flights and it includes three Airbus A319, 19 Airbus A320 and eight Airbus A321. The Airbus A320 and A321 have 180 and 199 seat capacity respectively, on a single economy class configuration.

But because Kingfisher offers business class on these flights the airline's capacity per flight reduces by 31-34 per cent.

The airline is planning to do away with the business class seats for which there is a lack of demand and move to an all economy configuration. According to reports, Kingfisher is also planning to hive off its low-cost arm, Kingfisher Red.

Successful model

Realising the success of the low-cost model in the domestic aviation industry, Jet Airways has decided to focus more on the low-cost business.

The airline's Chairman, Mr Naresh Goyal, said at the company's annual general meeting that the board and the management of the company are undertaking an in depth review of its business model.

“Soon we will be making changes to enable us to compete more effectively and retain our dominant position in the Indian market,” he said.

According to Government data, as per the figures of 2009-10, IndiGo made a profit of Rs 484.7 crore, SpiceJet made a profit of Rs 67 crore, JetLite (Rs 46.2 crore) and only GoAir made a loss of Rs 65 crore.

Compared to this, full service carriers piled on huge losses.

Air India's loss Rs 5,522.44 crore, Jet Airways' Rs 467.6 crore and Kingfisher Airlines' Rs 1,239 crore.

Out of these only Jet Airways managed to swing back to profit in 2010-11 with a profit of Rs 9.69 crore.

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