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AK Sachdev | Updated on August 08, 2021

AK Sachdev, retired group captain

Low cost: More than four-fifths of India’s airline seats are already low fare   -  The Hindu/KARUNAKARAN M

India hardly has any ‘low-cost’ airline, there are only ‘low-fare’ ones

The term ‘low-cost carrier’ marches on in India largely due to its import from outside when the second wave of liberalisation spawned several airlines between 2003 and 2007. The terms are more appropriate to the model in the US and Europe where the cost of running is kept low with regulatory, infrastructure and subsidy measures. In India there is really no ‘low-cost’ airline; the term ‘low-fare’ is more appropriate as no airline gets anything at a cost lower than its compatriot airlines. The comparatively low fares are engineered by internal mechanisms, often bordering infractions of air safety regulations. Since 2015, it has been done through progressive unbundling of air fares, the latest tranche being announced just a few days ago by way of preferential seats, meals, use of airport lounges, check-in baggage, transport of sports and musical equipment being made chargeable.

This latest regulation has the potential to make the basic fare more affordable and provides passengers with more options they can deprive themselves of to garner lower fares. It is difficult to imagine any other unbundling possibility except, as humorously suggested by a WhatsApp forward, charging a fee for use of onboard toilets! It is a bit confusing thus to hear of the term ‘ultra low-cost carrier’ being used for an upcoming airline — Akasa, to be promoted by Rakesh Jhunjhunwala, said to be India’s 48th richest man.

More than four-fifths of India’s airline seats are already low fare, having grown steadily since Air Deccan’s advent (2003), and applying worrisome pressure on full service carriers causing them to shrink in proportion to low-fare ones. Two waves of Covid-19 (and an impending third one) have put immense pressure on full scale carriers with the low-fare model holding out substantial benefits over the former. Thus, it makes good business sense to enter into the low-fare market. However, the timing would have to be right and it would not be wise to start an airline now as there are several imponderable and unpredictable factors related to Covid-19. In the past, Jhunjhunwala has made all his money by investing right and surely understands that correct timing is critical to harvesting bountiful returns on investment. His decision to cap his investment into the fledgling airline to only ₹260 crore (USD 35 million) is wise; his Midas touch should do the rest for him.

AK Sachdev retired group captain, and former COO of an airline

Published on August 08, 2021

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