Foreign airlines fly faster to breakeven

Now that India’s international air travel demand has picked up, foreign carriers are aggressively introducing new routes and adding frequencies.

Chin Yau Seng, chief executive of SilkAir, the wholly owned subsidiary of Singapore Airlines, said one of the reasons overseas carriers were feeling more confident about launching new flights was shorter breakeven period.

He said owing to the robust demand on many Indian routes it is taking less than half the time it used to take earlier to become profitable.

“Generally, it takes 2-3 years for a new route (in India) to break even ( at the current levels of fares) but looking at the strong demand we expect to break even in less than 12-18 months on our new routes (Bangalore and Chennai),” he said.

And Seng hopes to recover his investment on new routes at yields - net revenue per seat — not very different from last year.

The regional airline of Singapore Airlines on Monday announced the launch of daily services between Bangalore and Singapore at Rs 14,000 per passenger - including taxes. Next month, it will start daily flights from Chennai.

This will take its weekly frequency in India from the current 20 flights to 34 flights, a 70% jump in just one month. At present, it flies to four destinations -Thiruvananthapuram, Kochi, Hyderabad and Coimbatore.

“We are seeing very good demand on Indian routes and are recording around 70% load factor. We will not tinker with our yields much because we don’t want to lose our customers,” said the senior executive of SilkAir.

Like SilkAir, Lufthansa Group, which operates Lufthansa, Swiss International Airlines and Austrian Airlines, is also on an expansion mode in India and has re-introduced flights it had cancelled last year due to subdued demand.

Over the last one month, the group has reinstated flight frequencies from Bangalore, Mumbai and Delhi to Germany. On the Pune-Frankfurt sector, it has added economy class seats on its all-business flight that taken the number of seats up from 56 to 92.

“Since, we have been in India for a long time now we have broken even on most of our routes but yes, the recent jump in demand is helping our new flights to turn profitable faster even at lower fares,” said a Lufthansa executive, who did not want to be named.

According to the German airline group’s spokesperson, Lufthansa’s average load factor in Asia in April was 80.8%, up 3.1 percentage points from last year.

Dinesh A Keskar, president of Boeing India, believes yields ofairlines will continue to fly low on the international sector in India because of intense competition that is likely to break out with the entry of low-cost airlines.

“It (fierce fare war) happened in the domestic sector few years back. It will now happen in the overseas air travel sector. Today, we have only a handful of budget carriers operating but once there are more no-frills airlines, it will difficult for foreign airlines to maintain their current yields,” he said.

On Monday, Malaysian low-cost airline AirAsia offered one million free seats across its network of 130 routes including new routes from India.

Industry experts say AirAsia’s move will spark competition on overseas routes and force many foreign airline operators to slash fares to protect their loads. “In the event of such snips in fares, the breakeven period on new routes (of foreign carriers) could get stretched,” said an industry expert.