Low-Cost Exit

The message is clear that full service and low-cost carrier are unlikely to coexist and prosper when operated by one airline under a common banner and brand

The sudden decision by Kingfisher Airlines, announced end September 2011 to cease operations of Kingfisher Red, its low-cost arm, has been received with a sense of dismay and surprise by air travellers in India. Kingfisher Red was originally Air Deccan with which Captain G.R. Gopinath, in a pioneering effort, introduced the low-cost carrier (LCC) concept in August 2003. A “no frills service” model cloned from the West was eminently successful in India as it genuinely brought air travel from the confines of the elitist domain to within the affordable reach of the common man. The success of Air Deccan triggered a revolution in the airline industry in India with three new LCCs—IndiGo, SpiceJet and GoAir emerging on the scene soon after and proving to be highly successful. Meanwhile, Kingfisher Airlines bought Air Deccan four years ago to operate as its low-cost model under the Kingfisher brand and Jet Airways took charge of Air Sahara, which was rechristened as JetLite, the low-cost arm of the full service carrier (FSC) Jet. Air India, quite immune to the dynamics of the industry, remained without a low cost subsidiary.

The announcement by Kingfisher was followed by a press bulletin in which the airline clarified that in a few months, Kingfisher Red flights would be converted to “full service”. The airline was no longer interested in competing in the low-cost regime as their full service segment was more than adequately subscribed to and was generating relatively higher yields. Kingfisher Airlines currently offers three levels of service, Kingfisher First (business class), Kingfisher Class Economy and Kingfisher Red no frills economy. As a consequence of the recent decision, Kingfisher Airlines will be left with two full service models.

While from the point of view of the airline industry, the decision appears to run counter to the démarche in favour of the low-cost concept, Kingfisher’s decision was seen as a disconcerting signal by the public as such a move by this premier airline could lead (or mislead) other LCCs to recast their business models. There was a lurking possibility and consequent apprehension that the spirit of the low-cost revolution in the airline industry could be severely dampened or even reversed. Air travel could once again become a fading dream for the middle class.