Budget carriers eat into full services’ pie

According to the data compiled by the air safety regulator,Directorate General of Civil Aviation (DGCA),the market share of full service carriers like Jet Airways,Kingfisher Airlines and Air India in September 2010 stood at 58 per cent,plummeting to 52.5 per cent in January 2011.During the same period,share of budget carriers increased from 42 per cent to 47 per cent,just three per cent short of the halfway mark. In November,IndiGo dislodged national carrier Air India from its number three spot in the domestic skies. Following month,IndiGo closed the gap with Kingfisher Airlines,tied at number two market position.

“Low-cost airlines are clearly preferred airlines over full service counterparts. Various factors like pricing,on time performance and service have influenced passenger’s choice,” said a civil aviation ministry official. Another official pointed out that the slide in market share of full service carriers has co-incided with shifting of their operations to the Delhi airport’s new Terminal 3.

“Passengers prefer Terminal 1-D,from where budget airlines like Spice Jet,IndiGo and Go Air operate. Within ten minutes,one can reach the boarding gates from the Terminal entry points,whereas T3 requires longer walks,” said the second official. Jet Lite and Kingfisher Red,the low-cost arms of Jet Airways and Kingfisher Airlines that moved to Terminal 3,too have seen an erosion in their market share.

However,aviation analysts pointed towards capacity addition and network expansion by the budget carriers August-onwards which has enabled them to cover more ground. “Even as Kingfisher Airlines grounded some of its planes,Jet Lite,IndiGo and Spice Jet added aircraft to their fleet in 2010-11,” said Kapil Arora,partner (Infrastructure Practice),Ernst and Young. The fare hike in September-October period,ahead of Diwali,too saw a shift towards low-cost airlines,said Arora. “During this period,a lot of business travelers and holiday makers preferred to fly on an affordable airline,as prices rose sharply,” he said. Rise in aviation fuel costs and their subsequent burden on fliers too caused a shift towards budget airlines.

Even though Arora predicted a passenger shift from full-service to low-cost airlines,he said it will take another two years before budget airlines will take over their full service counterparts.

“Going by LCC’s plans,they are well-positioned in future and are poised to grow. Passengers are moving from full service to low cost as LCCs are turning out to be value carriers. They provide flexibility and comfort at affordable prices,” said Arora.