‘We don’t want a 100% loss’

With Indian aviation in the throes of turbulence, stories like that of Air India Express make for an interesting read. Even as doomsayers are writing obituaries for airlines, the low cost Air India’s low-cost arm is looking to grow both on the international routes and within India. Some might attribute the optimism to the fact that parent Air India is absorbing part of its costs, but the fact remains that the carrier has had a great run since 2005. Captain PP Singh, chief operating officer, Air India Express shared some of the airline’s plans with Nirmal John. Excerpts:

What has helped Air India Express post operating profits since the start?
One part, of course, is that we have a reasonable price. The other is the age of the fleet. Third is the selection of routes and the frequencies that you mount on them. There is a lot of competition, especially to the Gulf and to South East Asia. But what we did in the beginning was to take over some of the routes which were operated by Air India. While we did that, we also wanted to connect the Tier II points in India. If you see, most of the competition flies mostly from Delhi and Mumbai and a handful of other cities. So, most of the traffic has to go through a hub. We as a low cost carrier have gone where the immigrants were. We have connected those towns, directly to the points in the Gulf. Even for South East Asia, we have gone for routes which were not served much. We have a daily flight between Trichy and Singapore. What we have found is that when we go into interior points, the cost of operation is much less. People are willing to pay reasonable prices on these routes and we are reasonably priced.

What are the numbers? What would be your yield, your seat factors?
It would not be correct to state an average yield considering we fly so many different sectors. But I can say that our yields on any sector would be 15% less than a full service carrier flying on the same sector. Our seat factor is at 79-80%. And we have been consistently been able to maintain that.

Even with the current troubles in aviation?
Yes, we are still maintaining a healthy seat factor. We have always tried to maintain our fares at levels were we would make a profit. We don’t want to do a 100% load factor and then do a 100% loss. That is something we don’t want. Once you drop your yield, it is very difficult to gain it back. I think our yield management has been very effective. Our tickets have never been at throwaway prices. People have got a good deal when they travelled Express.

Is it just the low fares that are helping Express?
See, most of the major Gulf carriers have been flying into places in Kerala for example, and have even been increasing their frequencies. They offer full service amenities but most of them have pegged their fares at our level. Even then, we have been able to hang on to our market. So I don’t think it is price alone. We have been able to do it mainly because of good scheduling, good frequency, and reliability of aircraft with reduced maintenance costs. So, we have been able to gain confidence and through that we have repeat passengers.

What can Air India learn from AI Express?
No, no, Air India is a full service carrier; there is no question of learning. We are all from Air India. This model is a different model. It is a low cost model. Full service carrier will always be different.

But then, most LCC’s don’t offer food or snacks. You do…
The catering costs are also much less as compared with a full service carrier. We give a snack box. We do that due to the profile of our passengers and the duration of the minimum flight. Our flight from Kochi to Doha or Dubai would take four hours. We cannot expect a chap not to get anything to eat for four hours.

Why wouldn’t you want to monetise that? Airlines are doing that everywhere?
It would cost us about Rs 50-60. There are no plans to start charging people for that. It is part of our package. The question is, why should we always think what the US is doing? As far as we are concerned, this is part of our strategy. It was one of the things that we wanted to give. There are children, older people, there are some people flying in our carriers who are not as well-off, like labourers. At least basic snacks we think have to be given. We also have in-flight entertainment. For that we charge a little amount. We also sell liquor on board. In anything an airline does, you have to adjust to your market needs.

People say that Air India Express is profitable because a lot of costs are borne by Air India…
People say that low cost carriers should not have anything to do with the mother carrier. What we have done is that we are sharing engineering facilities; our managers sell both for Air India and Express. It is difficult to quantify these savings. The costs of an airline, like the servicing of debt, fuel, salaries of people, engineering parts, all these are entirely borne by Air India Express. Pilots and engineers, cabin crew, are all Air India Express. Buying the aircraft was arranged with the help of Air India, but the entire cost of repaying the debt is on Express. The savings come from things like operating out of Air India’s offices rather than having our own. We are using part of the hangar and also the commercial manpower for sales. Purchasing is also shared.

The likes of Air Arabia are increasing frequencies into India. Fly Dubai is coming soon…
There are also Indian carriers. There will be a lot of competition. You have to face the competition. The important thing is that you should always focus on your yield. Just trying to get market share, you will not only destroy yourselves, you will destroy more airlines also.

n_john@dnaindia.net