Low fares, high costs are a challenge in India, says Lufthansa's India head Wolfgang Will

Will said Indian market is so competitive that airlines are struggling to get decent average revenue per passenger

Lufthansa Airlines is the largest European airline in India with around 2.3 per cent of the market share of India’s international traffic. However, the German carrier faces challenge from Gulf airlines which dominate the Indian market. High costs and low fares in India is an issue too, Wolfgang Will, Lufthansa’s South Asia director tells Aneesh Phadnis. Excerpts:

Domestic and international airlines are seeing a passenger volume growth but yields are under pressure in India. What is Lufthansa’s experience?

2016 was an interesting year. As usual we saw airlines launch discount fares in February to get their base loads. But this year promotions have continued till now. We were reluctant to join the pack but we were forced to do it and yes there was a pressure on yields. Volume growth is never an issue in India because it is a growing market. India is not a low-cost market, it is a low-fare market. It is so competitive that airlines are struggling to get decent average revenue per passenger. But cost of operations is one of the highest in India.

In terms of profit is 2016 turning out to be better than 2015?

I cannot give a specific figure but all in all it is better. We did nice volumes and we had means of controlling our yields.

This is the first full year after the introduction of premium economy cabins on our India flights and this is a positive development. We could have stable yields despite all the promotions because of the premium economy product. It is priced more in the range of economy fares and for extra charge passengers get more amenities and comfort. The introduction of premium economy service has given us a nice boost and we have taken a market lead in the segment in Europe.

Gulf airlines dominate Indian market. What is Lufthansa's strategy to counter that?

Our strategy is to convince our customers in India about our products and services. We have better connectivity, larger network, consistent product. We only deploy the best of aircraft in India. Delhi will be the first destination for our new Airbus A350 aircraft next year. We have a strong footprint in the market. No other European airline has such strong presence in India.

Jet Airways code share with Air France-KLM will boost traffic at Paris and Amsterdam. Your comments.

The Lufthansa Group is blessed as it does not depend on one hub only. Our competitors sometimes struggle with efficiencies of their hub or with external factors. We have hubs at Frankfurt, Munich, Zurich, Vienna and now next year we will have a hub in Brussels (when Lufthansa completes acquisition of Air Brussels). We have the possibilities of offering more choices to our customers and I am not worried about Jet's partnership with Air France-KLM.

Brussels Airlines will launch flights to Mumbai next year. What advantages will the airline bring to the group?

There is a demand for point-to-point connection between Mumbai and Brussels. However, apart from London there are not too many destinations in Europe with a large origin-destination traffic flow from India. Most of the passengers travel onward to other cities in Europe or North America. From Brussels there are good connections to Tier-II cities in Britain. Geographically, it is very close to the Netherlands and north France and we could get traffic from those regions.

How has Lufthansa gained from Air India’s membership in Star Alliance?

We have code shares on our flights. Air India has operations to a lot of Tier-II and III cities in India. Passenger feed from Air India is important for us and has increased considerably since it joined the Star Alliance. It is good to have a partner which has a big footprint in the market.