Aviation experts predict bleak future as low cost carriers do not have no-frills airports to operate from and they pay as much as full service carriers, leading to losses.
Most people want to fly cheap and every day three out of four flights offer low fares. So, low cost carriers (LCC) should ideally be making money. But all LCCs except IndiGo have been flying at a loss. The reasons are many: steady rise in the cost of aviation turbine fuel (ATF), no low cost airports and the manpower requirement for every flight is same as that of full service carriers.
Also, the absence of robust online booking system forces airlines to open booking counters and employ additional staff — in effect expenses shoot up. The final problem is operating on crowded metro routes instead of concentrating on regional routes.
To make matters worse, most capacity addition happens in the LCC sector (see box for reasons). While announcing his decision to pull out of the LCC sector, Vijay Mallya, chairman of Kingfisher Airlines, said the “low cost segment is headed for a bloodbath”. “It makes sense to operate only in the full service sector as it offers better margins and the competition is low,” he said.
There are separate airports for low cost carriers in foreign countries, an aviation analyst said. “There are no fancy carpets or the best air conditioners; chairs are few in the waiting area,” he said. “These airports offer just the basic services. As a result, LCCs have to pay less.”
Also, limited parking space at these airports ensures a low cost carrier has a short turnaround time [the time an aircraft takes to offload passengers and takes off with new passengers].”
In India, LCCs pay the same as full service carriers to use an airport. “The only difference is passengers have to pay for a hot meal,” Jet Airways official said. “How long can we have low ticket prices when our expenses are so high. Naturally, we lose money per seat.”
Jetlite, the low cost wing of Jet Airways, accounted for almost 40% of Jet’s recurring losses when it contributed only 12-13% in revenues. It continues to have a high cost base — planes are old, guzzlers with high maintenance costs.
But what makes IndiGo different? It has a relatively new fleet, its manpower-to-aircraft ratio is the lowest and performance is consistent. Its aircraft are rarely grounded because of technical glitches.
SpiceJet started its operations on less crowded regional routes. But the airline is flying at a loss. At present, the regional markets that SpiceJet is targeting are being served by Jet.
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