Budget airlines still have some fare play
Facing high costs, budget airlines are devising innovative ways to cut expenses and draw more passengers. The plans include axing losing routes, reducing frequency on crowded routes to build capacity in flights and offering exciting fares to improve passenger numbers.
Three budget airlines--SpiceJet, IndiGo and Go Air--this month did not raise the fuel surcharge as done by three other airline groups--Jet Airways-JetLite, Kingfisher-Deccan and Air India. Go Air and Spicejet have, however, increased their basic fare by Rs 550 and Rs 300 for long and short haul routes, respectively. Though the increase is almost the same for the customer, it allows the airline to play with the fare, which unlike the surcharge can be flexible.
IndiGo is still working out a fare scheme that will draw in passengers. “We have not raised the fuel surcharge and are still evaluating the next step,” IndiGo’s Chief Executive Officer Bruce Ashby said.
So even if air fares in general rise passengers could get better deals from budget carriers. “Full service carriers can not match us in pricing. Their overall costs are higher. We urge the government to cut the sales tax on jet fuel and we will certainly bring down the surcharge,” said Jeh Wadia, Managing Director, Go Air. He added that improving revenue would be his priority to fight the rise in jet fuel cost.
“A few years ago it was not uncommon for a customer to pay Rs 10,000-15,000 to fly one way between metro cities. Today, that same trip costs about Rs 3,400. If fares rise a bit to help offset fuel prices, they still are 60-75 per cent less than in the past. In short, passengers can certainly expect low fares from IndiGo,” said Ashby of IndiGo.
Also for the first time in many months budget airlines are adopting the true low-cost model to attract more passengers to enable them to improve seat occupancy. In such a system a passenger who books early gets a cheaper fare.
“High jet fuel prices are affecting all. Though low-cost airlines will play the volumes game, they face a tough 9-12 months. It will be difficult to improve revenue and occupancy rates unless overcapacity is rationalised,” said Ankur Bhatia, Executive Director of aviation consulting company Bird Group.