The airline plans to protect its revenues through marketing campaigns, route rationalisation and a sound revenue management system.
MUMBAI: After clocking losses of Rs 340 crore for the 15 months ended June, 2006, budget carrier Air Deccan is changing course — from focussing on market share to revenues. As a corollary, route rationalisation and yield management become the buzzwords.
“We are planning to protect our revenues through innovative marketing campaigns, route rationalisation and a sound revenue management system. We have recently hired two executives from Ireland’s state-owned carrier Aer Lingus to manage our revenues. With this, things are expected to look up on the revenue side,” said Air Deccan CEO Warwick Brady on the sideline of Centre for Asia Pacific Aviation (CAPA) symposium here on Saturday.
It has already kicked off the process by cutting frequency and flights on some sectors to make them commercially viable. The no-frills airline, which has usurped a substantial chunk of the aviation market pie (21.2% in June, 2006) over the last one year, wants to improve its yields by 5-6% over the next couple of months.
“December onwards our yields would be up by 5-6%, which would give us better margins. Playing the revenue game is hard because the range of margin (between $1-3 -Rs 46-138 per passenger) in the airline business is very small,” said Brady.
Air Deccan’s current average yield is around Rs 2,700 per passenger. Today the airline was missing the break-even yield by $7-8 (Rs 322-368) in a bad month and by $4-5 (Rs 184-230) in a good month. On a fare of Rs 3,000, we need to achieve a load factor of 80% to break even,” Brady said.
At present, the airline’s average load factor is 78%. However, on Airbus routes, it manages to register a higher load of over 85%. The airline, which will be operating 60,000 flights from now to March, 2007 (on existing and new aircraft), is looking at a market share of 25% by the middle of 2007.
And as the airline pursues higher revenues, it does not mind if it slips a little on market share. “We don’t want to jeopardise our revenue flow for 1-2% market share,” quips Brady.
Analysts said the budget carrier’s move was a step in the right direction. “This mindset is a good change. There is no point in filling up your aircraft 100% if you are not making profits. Indian airlines need to concentrate on keeping their costs low and ensure steady stream of healthy revenue to offer competitive fares. A focused approach to bottomline is very critical in ensuring survival of airlines,” said Kalpesh Parekh, assistant vice-president at ASK Raymond James.
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