Regional Vis-À-Vis Low-Cost

Low-cost carriers have become the norm in India with legacy options, especially classes other than economy, used only by the rich tourists, the excessively affluent Indian still waiting to buy his first business aircraft, or executives travelling at company or government expense

The year 2003 was perhaps the most significant in the history of Indian civil aviation. Scheduled airlines crossed the ticket pricing Rubicon with low-cost pioneer Air Deccan leading the charge. The unquestioned reign of legacy carriers was over. Three mega mergers later i.e. Air India with Indian Airlines, Kingfisher with Air Deccan and Jet Airways with Air Sahara, there is no airline company that does not have either all or a significant proportion of its passenger operations and revenue template based on the low-cost model.

While IndiGo, SpiceJet and GoAir work essentially on the lowcost concept, the grouping of legacy carriers i.e. Air India, Jet Airways and Kingfisher Airlines, have low-cost components which are steadily increasing in extent. The low-cost model should, by all logic, have gravitated towards Tier-II and Tier-III cities, with a resultant boost to regional aviation. However, the peculiarities of the Indian civil aviation regulatory regime have kept the regional carriers from thriving. Under the same regime, low-cost carriers have become the norm in India with legacy options, especially classes other than economy, exercised only by the rich tourist, the excessively affluent Indian still waiting to buy his first business aircraft, or the freeloader travelling at company or government expense. Is there a connect between the low-cost model and regional aviation or do they exist on different non-intersecting planes?

Dilemma of the Low-cost Model

In a way, the current smothered state of Kingfisher Airlines is a vindication of the low-cost model. Dr Vijay Mallya had been a voluble critic of the low-cost model, constantly flaunting his “King of Good Times” rendering of an airline. Indeed, his publicly iterated stance of studied derision on low-cost carriers left him no latitude to adapt to the changing situation in India. Continual warnings of impending doom failed to elicit the rational response that aviation watchers anticipated from him with their toes curled. In my opinion, the point of no return came when in November 2011, Kingfisher was rapped on the knuckles publicly for withdrawing its services to the North-east region without explicit permission from the Ministry of Civil Aviation. As a staged response, Kingfisher declared that it would revisit its operational model but in fact did nothing tangible to cut costs. Had Kingfisher, even at that stage, decided to embrace the low-cost model, it could have avoided its present ignominy and financial predicament.

Some aviation experts compellingly argue that there is no low-cost carrier operation in India. This is because there is no low-cost terminal anywhere in India, the cost of aviation fuel/oils/lubricants is the same for ‘legacy’ and ‘low’-cost carriers and the airport, landing, terminal and navigation charges are differentiated only by the aircraft weight and not whether the operator claims to be low-cost carrier or not. The carriers themselves, for the reasons stated above, prefer to call themselves low fare carriers in contrast to low-cost. Meanwhile the passenger corpus in India is roughly divided into three segments. The first i.e. the most affluent, is disdainful about low-cost or low fare options and revels in its loyalty to the legacy carriers or their present avatars. The second is the other end of the spectrum and is preoccupied only with the price tag of the air tickets he buys and even cost difference of a hundred rupees can sway his decision.

However, it is the third category that is relevant to furthering the low-cost model, the value seeker. It is this class of air traveller that has the time and the inclination to compare air ticket costs, and what each ticket entails or excludes by way of seating, entertainment, baggage rules as also food and beverages. That is not to say that the offer of a free snack on board is guaranteed to beguile this class of customer. After all, the longest flight in India is around two and a half hours and with careful planning, one could forego the onboard snack, provided the trade-off was a hefty slice off the airfare one was paying. Coming back to the low-cost carrier, it is unlikely that the Indian establishment is ever going to look at providing any kind of concessions or discounts to some airline merely because it purports to charge its customers less for air travel than its legacy competitors. Nor is it to be expected that some mark-downs will come in the way of airlines looking at regional airports to add to their network.

The existing Route Dispersal Guidelines (RDGs) stipulate that a percentage of the flights flown between metros would be flown on routes connecting Tier-II and Tier-III cities. There is a further requirement to operate a percentage of flights to remote locations. The RDGs are aimed at ensuring that a minimum proportion of scheduled traffic is dedicated to the unattractive routes. ‘Regional’ airlines are those that can connect to only one metro (except in the Southern region where three metros exist) to nonmetros. As of today, Air Mantra is limping on as the only ‘regional’ airline in India.