The LCC model: India and beyond
Majority of Indian aviation business is from Low Cost Carriers (LCCs). However, it’s still different from how LCCs work internationally.
The LCC business in India started with Air Deccan in 2003 and grew in stature with the start of operations of IndiGo, SpiceJet and Go Air in 2005. With AirAsia India commencing operations in 2014, more than 70 per cent of Indian domestic aviation is now in the LCC segment.
Having had the experience of flying the classic international LCCs like Ryanair, EasyJet, Southwest and AirAsia and the Indian LCCs, I see that the service standards are very much comparable with many of the Indian LCCs offering much better service level onboard as well as on the ground on Indian domestic routes. As a matter of fact, AirAsia India has replicated the AirAsia product as we have it in Malaysia and Thailand. I notice that the Indian LCCs have a lot more ground staff, especially for check-in service and boarding, than the LCCs abroad like Ryanair or Southwest, where we can see the same check-in staff, closing the counter and doing the boarding at the gate.
Another area where the classic LCC model differs from Indian LCCs is that most international LCCs operate on a strict point to point flight with usually no crew change or layover other than their home base. AirAsia Malaysia operates all their flights coming back to the home base. In India, I see many carriers operating flights going onward to a third destination with crew change and layovers where needed. Another difference, which is now prevalent in many LCCs is the onward carriage of baggage especially on international section. Ryanair and EasyJet do not connect baggage onward. Carriers in this part of the world, which depend on network passengers, are now slowly changing over to offering onward through connections with baggage booked onward. In AirAsia we call it ‘Fly Thru’.
The non-availability of low-cost airports is another issue for LCCs in India. Ryanair and EasyJet uses Luton or Stanstead in London, AirAsia Malaysia uses LCCT in KL and Thai AirAsia uses Don Muang in Bangkok at much lower cost of operations. There is no low-cost facilities in any Indian airports. In my opinion, T2 in Delhi, HAL Airport in Bengaluru, and Begumpet Airport in Hyderabad — all three of which are lying unutilised can be made into very functional low-cost airports. The rule in India that there should be no airport within 150kms of an existing airport is rather restrictive.
The new National Civil Aviation Policy emphasises the need for regional connectivity and prioritises the building of low-cost airports in Tier II and Tier III cities. This focus in my opinion is absolutely necessary if air connectivity has to reach the smaller cities of the country and tap the great potential in these cities and towns.
With the ATF prices expected to continue to remain low in the near time, this is the best opportunity for LCCs to optimise their operations and grow the market with affordable fares. Unfortunately, I see a trend in India for even the LCCs to hike up the fares whenever competition is low and a carrier operating that route is able to demand and get a high fare on even a one hour flight. I have seen that at any given sector, if the right capacity is offered at an affordable price, the demand is always there and you can expect the needed growth to make the route profitable. This should be the basic rule for LCCs — keep the fares as low as possible and generate a new market. Do not look at short time gains with high fares.
I am extremely bullish on the fast growing Indian aviation sector. What we have seen so far is only a very small part of the huge Indian travel market. Over 23 million Indians travel by Indian Railways every day. We just need to convert one per cent of that traffic to travel by air and we will see an exponential growth in air travel. It is a boom waiting to happen. ( The views expressed are solely of the author. The publication may or may not subscribe to the same.)