Kingfisher justifies low-cost biz exit
Competition in the low-cost segment will be more intense as compared to the full service space, Kingfisher Airlines Ltd CEO Sanjay Aggarwal said in a statement issued by the airline today.india Updated: Oct 05, 2011 21:08 IST
Competition in the low-cost segment will be more intense as compared to the full service space, Kingfisher Airlines Ltd CEO Sanjay Aggarwal said in a statement issued by the airline on Wednesday.
Last week, the Vijay Mallya-led airline announced that it would shut down its low-cost brand, Kingfisher Red. Aggarwal said that there had been a lot of speculation since the announcement and he would like to clear up any misconceptions.
"While there are currently five airlines participating in the low cost carrier (LCCs) segment, there are only three full service carriers (FSC). We believe that competition will be far more intense in the low fare space than in the full service space," he said.
Making it clear that there would be no reduction in Kingfisher's fleet size or its network, Aggarwal said the operating costs of LCCs and FSCs were similar. FSCs, he said, incurred additional costs on things like global distribution, in-flight catering. "These additional costs are more than recovered through higher yields," he said.
Referring to orders for more than 250 planes placed by LCCs, he said, "Capacity induction of the LCCs has outpaced the demand growth in the domestic market. The induction of so many additional aircraft in the low cost segment will potentially lead to substantial overcapacity and a price war with declining yields."