Flying high on low costs

Paran Balakrishnan | Updated on March 09, 2018


With budget airlines sweeping the skies globally, regular carriers have also been forced to look at slashing fares

It was 1978 and London was plastered with posters of a tubby, balding man boldly declaring, “I'm Freddie. Fly me!” Freddie Laker was tossing a grenade into the sedate world of global civil aviation by offering enticingly super-cheap fares — sometimes as low as $37 — to New York. Sure enough, the British took up his offer in droves and made the inexpensive journey on Laker’s Skytrain across the Atlantic — and low-cost flying was born.

The 1970s low-cost revolution didn’t last long. Laker was forced out of the skies in 1982 after climbing too high, too quickly, and going bankrupt. But the tantalising idea that passengers could be flown round the world at rock-bottom prices never quite went away.

Free spirit

Today it’s clear the Spirit of Sir Freddie rules the skies. About 70 per cent of the Indian market has been captured by low-cost players such as Indigo, SpiceJet and Go. But the perceived wisdom in the aviation industry, till a few years ago, was that low-cost aviation wouldn't work for long-haul flights and that passengers would baulk at being packed liked sardines into smaller seats with far less legroom for long cross-continental stretches.

Now, the realisation has dawned that passengers will endure great discomfort for long periods of time, if the price is right. Long-haul, low-cost airlines have even reached Indian skies. “It’s a matter of time before what has happened in the short-haul sector will happen in the long-haul sector,” says Suresh Nair, general manager, India, Sri Lanka, Bangladesh, AirAsia Group.

In February, AirAsia X, the world’s largest low-cost, long-haul airline company, is launching four flights weekly from its Kuala Lumpur home base all the way to Jaipur. In March, AirAsia X will be heading from KL to Amritsar. Its rival, Scoot, a low-cost airline owned by Singapore Airlines, is already flying to Lucknow, Jaipur and Amritsar. Both airlines are offering rock-bottom prices and passenger travel onwards to anywhere in Asia or Australia from Kuala Lumpur or Singapore. Scoot reportedly will also offer flights all the way to Europe from India.

The skies in Europe

In Europe too, the established airlines are moving quickly to ensure they don’t get left behind by fast-flying rivals. On December 1, 2017, the unusually named airline, Joon, took to the skies. Joon is a low-cost subsidiary (the name’s a play on the French word jeune which means young) of French national carrier Air France. Joon has launched short-haul flights to cities such as Berlin and Lisbon, and will soon spread its wings to more distant destinations such as Cape Town, Istanbul and Mahe, the Seychelles capital. Earlier in 2017, Barcelona-based IAG, the holding company of British Airways and Iberia, launched Level, its low-cost airline that’s already flying to North and South America.

So far, the low-cost, long-haul sector has captured around 1 per cent of the world’s aviation market. But the fact that industry stalwarts like Air France and BA are stripping out costs and rushing onto the tarmac is conclusive proof that the long-haul, low-cost era is here to stay. Leading the way are veterans of the game such as AirAsia X in the Asian markets and Norwegian, the feisty carrier which is changing the rules of flying across the Atlantic. AirAsia X’s chief, Tony Fernandes, was far out in front when he launched Air Asia X back in 2007; today it has 30 planes and about 50 more on order. Fernandes is putting bigger bets on the long-haul business with two newer airlines, Thai AirAsia X and Indonesia AirAsia X.

Similar scenarios are being played out around the world. Around 17 low-cost, long-haul airlines have launched since 2012 globally. Some, like Iceland’s Wow Air, which flies to 33 destinations, are independent players and expanding nimbly. Others are subsidiaries of established carriers. Air Canada, for instance, has its second carrier Rouge, which focuses on trans-Atlantic routes and South America.

The emerging new star is Norwegian, a four-year-old airline which has 150 aeroplanes and which flies to far-flung destinations from airports such as Oslo, Copenhagen and Stockholm, to Bangkok and Singapore in Asia and also places like Seattle, Denver and Boston in the US. Norwegian’s quick rise has prompted Europe’s top carriers to make their low-cost moves.

Less is more

Packing more passengers into planes is the key to the low-cost, long-haul game. AirAsia X flies A330s that usually have 377 seats and 12 flatbed seats for business class. A regular service airline normally has 250 seats in a similar model plane. In the classic low-cost model followed by EasyJet, Ryanair and Southwest Airlines, there are other savings. Planes return to base at night, eliminating hotel charges for the crews. RyanAir and EasyJet do not do baggage transfers to connecting flights. “You might have passengers to 120 destinations. Each piece of baggage has to be sorted and tagged manually and transferred to connecting flights. This needs huge manpower and is time-consuming,” says an airline industry executive.

The industry’s newer players quickly discovered that following such rules rigidly wouldn’t work. AirAsia, for instance, uses its far-reaching network to best advantage and can take Indian passengers from Delhi or Mumbai to Kuala Lumpur and on to Melbourne or Sydney and other destinations.

What kind of prices can passengers expect? Airline executives say savings could be in the region of 30 to 40 per cent. In April, on AirAsia, fares to Melbourne could be around ₹35,000 return compared to slightly over ₹60,000 on a non-low-cost flight. The regular carriers are, of course, also slashing fares to match the low-cost carriers.

Are Indian carriers like Indigo and SpiceJet preparing to fly low-cost to Europe and other corners of the globe? SpiceJet’s CEO Ajay Singh recently declared it was time local carriers reclaimed Indian passengers. He said: “There’s very little reason why we (Indians) should be using airlines like Emirates and Etihad and others flying through their hubs... Both Indigo and SpiceJet at some point of time will look at wide-bodied planes. It’s inevitable and it’s going to happen.”

However, both airlines would probably need A330s or Dreamliners to fly such routes and haven’t made moves to get them yet. One thing’s certain: when the long-haul, low-cost revolution reaches this country, Indians will be flying high.

Published on January 09, 2018

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