The dramatic passenger growth witnessed by low-cost carriers (LCC) has forced a re-think of strategy by full-service carriers.
State-owned Air India (AI) has decided to slash business class seats on domestic routes from 20 to 12 and increase economy seats by three rows or 18 seats.AI's decision, which was approved by its board on Monday, follows a similar decision by market leader Jet Airways, which has decided to increase domestic low-fare capacity from the present 73% to around 85% of the airline's capacity.
Vijay Mallya owned Kingfisher Airlines on the other hand has decided to exit the low-fare segment of the market shutting down Kingfisher Red.
Standalone LCCs like IndiGo, SpiceJet and Go Air held 50% of the domestic market share in December last year.
LCC penetration has almost doubled over the past five years said aviation consultancy firm Centre for Asia Pacific Aviation. The LCC market share, including the low-cost subsidiaries of full service carriers, is estimated to be over 70%.
The AI board also approved a decision to rent out properties to raise cash.
Hindustan Times had reported last month the recommendations of a government panel to let out AI's iconic 23-storey Nariman Point building in South Mumbai, properties in Nerul, Navi Mumbai and Baba Kharak Singh Marg and Vasant Vihar in Delhi.
The panel, tasked with vetting AI's turnaround plan, had projected revenues from such monetisation at Rs 4,000 crore over the first five years going up to around Rs 10,000 crore in the next ten years.
AI has a debt of nearly Rs 50,000 crore.
Monetisation of properties was one of the key conditions put up by the panel for future government assistance to AI.