Introduction
Travelling via Airplane used to be like a dream for the common man as in those days only few could afford the luxury of travelling via air. Even though it was time efficient, individuals including corporate would travel via train to save on costs. However, Low Cost Airlines (LCC) brought about a revolution in the aviation industry and changed its dynamics forever!
Origin
The no frills airlines as it is called, are basically airlines with low operational cost, however, these days it is identified with low priced tickets and limited resources.
The budget airlines or no-frills carrier isn’t a novel concept for the aviation sector. The idea came way back in 1971, to Herb Kelleher, then CEO of Southwest Airlines. The fourth largest carrier in the US, airlines brought about a rage, when it offered tickets cheaper than that of a coach ride!
However, the idea arrived a little too late in India to Captain Gopinath in 2003, when he kicked off Air Deccan, which fulfilled common man’s dreams of coveted air travel. In its span of 5 years before it was sold to Vijay Mallya’s Kingfisher Airlines, Air Deccan became first low cost airline to travel across the country including the second tier cities. With its launch, LCC’s were readily accepted by Indian passengers, which led to increase in fleet size for the carrier.
Expansion
As the industry matured over the years, low cost carriers managed to increase their share of pie in the domestic aviation sector. In 2011, the market share of no frills airlines increased to 41.1% during January 2011, an increase over 34.3% in the past two years. The impact axed the share of regular airlines by 5% which was upto 50% market share until two years ago. Companies like Spice Jet, Indigo, Jet Airways, and Kingfisher Airlines smelled the opportunity and entered into the business. The total passenger travelled zoomed to 19% at 9.45 lakh in the month of January as compared to 7.94 lakh last year.
Impact
LCC came as a saviour for the aviation industry specifically in times of turbulence in the sector. The economy is reeling under slowing demand in the domestic industry. As a result various carriers entered into the low cost space to save on the operational cost and improve their efficiency. Jet Airways came up with its low cost carrier called Jet Lite. Ever since its launch, company managed to sail through in the high tide situation with higher load factor which generated more revenue per passenger. The increase in passenger capacity had a direct impact on capacity expansion in terms of fleet sizes and routes travelled. For both the domestic and international passengers, low cost travel has taken priority over other factors, which has resulted in higher frequency of flights for the industry.
In the current scenario, the aviation sector in the country is set to grow at the rate of 20 % CAGR. This growth is an opportunity for the companies to expand their operations in the low cost carrier space of the aviation sector.
Till then we can fly the good times…
Shreya Agrawal
