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Unlike in the past when the low-cost carriers (LCCs) gained at the expense of the full-service carriers (FSCs), the latter held their own in 2015.
The market share break-up between LCCs and FSCs in 2014 and 2015 remain around the same level at 60:40. This is despite IndiGo increasing its dominance and most of the new entrants being LCCs. That’s because SpiceJet — the second largest LCC — lost a lot of ground temporarily, and Jet Airways exited the low-cost space earlier being operated under the JetKonnect brand.
Can FSCs up the ante and gain share this year? Market experts don’t think so. Says independent aviation consultant Bharath Mahadevan, “The market is very price-driven. A random look at a Delhi-Mumbai flight for a few weeks out shows that Jet Airways and IndiGo are on par when it comes to pricing around the same time band.”
He adds, “In 2016, the situation will be the same — low fuel prices will allow carriers flexibility to offer rock-bottom fares. FSC offerings will be priced at the same levels as those of LCCs, and there should be healthy passenger growth for this year as well. As long as FSCs price at the same levels, it will be tough to tell how much of the market will absorb full service price levels.”
Amber Dubey of KPMG concurs, “The difference between FSC and LCC offerings did not reflect in the airfares, which meant higher seat occupancy for the FSC than expected. Assuming that FSCs do not go for irrational discounting, we may see the share of LCCs rising in 2016 as more people from India’s interiors are brought into the national air grid.”
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