Airlines shifting capacity to short-haul overseas routes

Diminishing market and eroding yields in the domestic sector are making local air carriers, which operate international flights, to migrate capacity to short-haul overseas destinations like Middle Eastern and Saarc countries.

Lately, all the three Indian international airlines - Jet Airways, Kingfisher Airlines and the state-owned Air India - have been aggressively expanding their services in the neighbouring regions even as they are cutting capacity in the domestic market.

Jet, for instance, has slashed 30% of its domestic capacity till now and plans to snip further 10% during the current year but it is furiously adding flights in the Gulf and South Asian region.

It operates 24 flights daily on these sectors and has announced the launch of Mumbai-Jeddah service on June 14 and Mumbai-Riyadh on June 28.

In a conference call with analysts late last month, Wolfgang Prock-Schauer, chief executive officer of Jet Airways, said even as his airlines was downsizing in the domestic market, it was pursuing opportunities in the international market.

“We will add additional services in the Saarc and Asean regions,” he said.

Jet’s rival Kingfisher is also tapping potential on these routes.

The Vijay Mallya-owned airline, which dropped its ambitious international expansion plans of flying non-stop on long-haul sectors — US and Europe, is not fighting shy of starting service on closer-to-home destinations like Colombo and Dhaka.

It is planning to launch an all-economy Bangalore-Dubai service from June 25 on an Airbus A320 and has got approval to fly to Chittagong, Hong Kong, Singapore and Bangkok. So, what’s making short-haul foreign destinations attractive for local players?

Kapil Kaul, CEO - India and Middle East - Centre for Asia Pacific Aviation (CAPA), said in a scenario of slowdown in the local market, it makes sense for the airlines to shift capacity from the loss-making domestic routes to regional international market.

“There is demand for more (flight) connections to SAARC and Middle East from southern and eastern Indian points that can be explored by these carriers,” he said.

Kaul, however, cautioned airlines that they should not bank too much on far eastern destinations such as Singapore, Malaysia and Hong Kong, where demand was drying up on impact of global slowdown.

Another industry expert said the shorter overseas destinations were also offering better yields and loads compared to domestic flights even as the cost of operation for the two was more or less the same. 

“These airlines are using same aircraft (ATRs and A320s) on these (Gulf and South Asian) sectors as on domestic sector, but the fares and loads on them are higher so they are more profitable,” he said.  Kingfisher started flights to Colombo and Dhaka using its domestic fleet of small ATR (turboprop) planes.

Jet has also restructured its capacity on main routes in the Middle East and Far Eastern sectors by changing the fleet type from 200-seater A-330 to 130-140-seater B-737.  Jet logged average load factors of 78.3% and 75.6% on the Asean and Saarc routes in the March quarter. This was way above its domestic average load factor during the same period at 64.6%.