Airlines will continue to add low-cost seats

The trend of airlines shifting capacities to the low-cost model, as witnessed in the current year, is likely to continue in the next year. Around 80 per cent of the capacity converted or added in the latter part of 2009 had been in the low-cost segment, and a majority came from conversions of full fledged services.

Airlines in India had cut 58 per cent of their capacity in the first six months of the year, but they also added 40 per cent in the second half. The capacity additions took place only after passenger numbers started to rise in June.

“Around 80 per cent of the capacity added or converted this year has been in the low-cost segment. A majority of it came from Jet Airways and Kingfisher converting (existing full-fledged) capacities into low-cost seats. Jet and Kingfisher now have around 75 per cent of their capacity as low-cost,” online travel portal Yatra.com’s head of air business Bhawana Agarwal said. Existing low-cost carriers (LCCs) have also added capacity, but that is much less, she added.

“A majority of the capacity increase has come due to conversions. Airlines which had grounded services due to less demand in the first half of the year restarted it in the low-cost segment,” Makemytrip.com’s head of online sales Mohit Srivastava said.

Experts feel the coming year will also see further additions in the low-cost segment, with additions in the full-service segment being much less.

“I see an addition in the low-cost segment in the first half of the year and, if full-service carriers see any addition, it would only be after June or July in the coming year,” Agarwal said.

“The total capacity in the system is around 20 per cent less than what it was in January this year, which is good for airlines. So, capacity addition will happen next year and such additions would happen in the low-cost segment,” Travel Agents’ Federation of India General Secretary Ajay Prakash said. He further said, since the demand is high, yields will also not be impacted and, in fact, fares may rise by around 15 per cent.

Even otherwise, as fares are directly proportional to the increase in demand and the number of people flying, yields improve even after adding more low-cost seats.

“Shifting to the low-cost model brings down fares, but also increases passenger numbers that ultimately bring more revenue,” Jet Airways Executive Director Saroj Datta said.

“Around 40 per cent of the airline’s revenue comes from last-minute travellers, who account for 15 per cent of total travelers,” Makemytrip.com’s Srivastava said.