Low-cost airlines pull down global fares

Seats being offered by LCCs in international routes up from 3% of the total last year to 10%

Planning to fly to Kuala Lumpur from Chennai? Book yourself in an Air Asia flight and you have to fork out just Rs 4,100, compared with Rs 8,243 charged by Jet Airways. Also, for a trip to Sharjah from Delhi, Air Arabia charges just Rs 7,659, compared with Jet’s Rs 11,217.

With the percentage of seats being offered by low-cost carriers (LCC) in international routes to and from India increasing from around three per cent (in April 2009) of the total seats on offer to 10 per cent currently, there is welcome pressure on fares from the customer’s point of view.

“The low-cost capacity should increase from 10 per cent to 25 per cent in the international skies in the next few years, as many international LCCs have plans to come to India, and a few Indian LCCs will also do so (that is, fly abroad),” said Ajay Prakash, general secretary, Travel Agents Federation of India.

Various Indian LCCs are launching short-haul international routes, to Southeast Asian and West Asian countries. With fares around 50 per cent lower, the LCCs are obviously attracting customers.

“As the attraction of LCCs is the price they offer, their launch will create an impact on the existing fares and also increase competition for the legacy carriers,” said Centre for Asia Pacific Aviation’s Chief Executive Officer, Kapil Kaul.

International airlines like Air Asia, Air Arabia and Air India Express operate to various destinations in the country and FlyDubai and SpiceJet are to start operations soon.

Currently, Air Asia flies to four destinations and has announced plans to fly to five more places in the country. “Our fares are around 50 per cent cheaper than the legacy carriers operating in these sectors,” said a spokesperson for the airline.

Air Arabia operates flights from its hub in Sharjah to 13 destinations in the country and the fares offered are around 40 per cent less than the legacy carriers. “We are looking at operating to more destinations in the country but that depends on approval from the government,” said a company spokesperson.

Fly Dubai had applied for permission to operate three destinations in the country and have got permission to operate flights from Lucknow. Delhi-registered SpiceJet is planning to start its international operations from June and has said its fares would be 15 per cent cheaper than other airlines.

Full service airlines, however, feel these launches by LCCs will also increase the size of the market. But, they add, if it impacts their business, they will have to act.

“These new low-cost carriers are offering very cheap fares. And, if our load factors see a dip, we will definitely have to tinker with our fares to compete,” said a Jet Airways executive, who did not want to be identified.

Others have a different view.“Their launch will not impact us much. They will carry their load and we will continue to carry ours. Also, the size of the market will increase,” said a Kingfisher Airline executive.

Analysts also feel these LCCs would stimulate the market and bring more and more people on to airplanes. “If the norms for bilateral (flights) are relaxed and more and more LCCs are allowed, they will rule the short-haul international sector,” said Kaul.