Thanks to Air Deccan, other airlines find that it pays to drop fares

At the rate at which airlines are slashing fares, a time may soon come when Lalu Yadav's railway ministry won't matter much.

The credit for triggering this price offensive goes to Air Deccan, which commenced operations less than a year ago with two 48-seater aircraft, obtained on dry lease from the French-based aviation major ATR. Inspired by the Irish carrier Ryan Air, Air Deccan offers airfares as low as Rs 500 plus taxes on the Mumbai-Delhi sector.

While one has to book a seat three months in advance to avail of this rock-bottom fare, Air Deccan's normal fares are much lower than what passengers are used to paying for air travel on Jet Airways, Indian Airlines or Air Sahara. All this is possible on Air Deccan because it is a 'no frills airline', meaning that the airline has cut out all the add-on costs of travel and focuses on getting people from one location to another safely. Thus frills like meals, attendants and airport lounges among others have been done away with.

Instead, additional seats to carry as many extra passengers as possible, have been added. For instance, by not serving warm meals, the space occupied by the aircrafts' pantry area and inflight service trolleys is used for seating additional passengers. The best part of it is that all this is not at the cost of safety. The carrier uses the standard Airbus aircraft currently being used by Indian Airlines and Jet Airways.

Air Deccan has already taken three state-of-the-art 180-seater Airbus-320 jets on dry lease of which one has already landed.

What is making things easier for Air Deccan is that states like Andhra Pradesh and Karnataka have announced a reduction in sales tax for no frills regional airlines to improve air connectivity in those states. While Andhra has completely abolished sales tax, Karnataka has reduced it from 25 per cent to just 4 per cent.

'Following the enthusiastic response to Air Deccan's announcement from the traveling public a number of other low cost airlines have applied for licences. These include Yamuna Airways, Indus Air, UB group's Kingfisher Airline, Nusli Wadia's (of Bombay Dyeing) no frills airline, and Arab Express. The last will operate between India and the Gulf region only.

UB for instance has signed a deal with the European aircraft maker Airbus Industrie to purchase four planes and an option to buy eight more to boost the Kingfisher Airline fleet.

All this seems to have sent the leading domestic carriers - Indian Airlines, Jet Airways and Air Sahara into a tizzy and each airline is now going all out to ensure they it doesn't lose out to the new low-cost airlines - or to each other. Now it seems a lot depends on who gets there first.

Indian Airlines has announced that passengers flying between two metros need pay only an extra Rs1,000 to take a connecting flight to a smaller city. Indian Airlines' officials say the scheme is aimed at tapping air travel demand among those living in smaller towns and cities, who usually opt for road or railway travel.

Air Sahara now plans to increase the frequency of its flights to the interiors of the country by 50 to 60 per cent this year. The airline will also introduce the hub-and-spoke system, with metros as hubs. Passengers traveling from one metro to another and then on to a small town could pay the standard fare on the metro leg of the journey, but a lower fare to the small town.

The airlines are also working on upgrading their frequent fliers programmes (FFP). Jet Airways has upgraded its FFP and is focusing on its yield-management strategy. The airline is seeking to lure passengers who fly less frequently. Under this scheme, seats that are not occupied on a flight, will be offered at lower rates.

Indian Airlines has revised its frequent flier programme to enable those with even a single boarding pass with a single boarding pass. Indian Airlines' frequent flyer club earlier had a Rs1,000 enrollment fee which gave way to the three boarding pass norm and now just a single boarding pass qualifies travelers to enter the frequent flyer club.

The Indian Airlines FFP has been merged with Air-India's programme, which will allow international passengers to earn mileage points. If you fly Indian Airlines, you'll get Air-India mileage points, though the offer is valid only till September, this year.

Air Sahara is also planning to launch a 'dynamic fare' model. Under this model, fares will be based on the daily market demand. In short, Air Sahara, too, will sell vacant seats at lower fares.
The established airlines knowing they can't fight the low-cost carriers in terms of price are emphasising the coverage and service part of flying.

The price war
However, Air Sahara, which has always been quick to react on the fare front, last week, announced its surprise fare package. The airline announced a reduction in fares by 59 to 69 per cent on the busy revenue-earning metro routes linking Mumbai, New Delhi, Kolkata and Bangalore with the return air fare between Delhi and Mumbai being brought down 69 per cent to Rs 4,444 - compared to Rs 4,420 for air-conditioned rail travel along the same route.

However, the prices are subject to the tickets being purchased at least 30 days in advance. "This initiative would give an opportunity to the train traveller to opt for air travel," said Air Sahara president Rono J Dutta.

The airline is also planning to launch a 'dynamic fare' model that would fix fares between various domestic destinations based on daily market demand.

Indian Airlines has announced a new apex fare slab for purchase of tickets in eight sectors, 28 days in advance - two days less than those offered by Air Sahara and Jet Airways.

The new D-28 segment would be valid for travel on the Delhi-Mumbai, Delhi-Kolkata, Delhi-Hyderabad, Delhi-Bangalore, Delhi-Chennai, Kolkata-Mumbai, Kolkata-Bangalore and Chennai- Kolkata sectors.

IA earlier had only two segments, D-7 (one week advance) and D-21 (three weeks advance), under the 'smart apex' scheme. The D-28 fares would be available for sale on one way or round trips as against round trip fares offered by Air Sahara. However, the 30-day advance fare offered by Air Sahara is valid throughout the year, while IA's D-28 fare is valid till October 15.

Not to be left behind, Jet Airways has announced the 'super apex monsoon' fares and 'special monsoon' point-to-point economy class fares and return excursion fares which are available on 56 and 26 sectors respectively.

A passenger availing himself of the Jet Airways point-to-point economy class fares can travel on the Hyderabad-Delhi-Chandigarh route (or in the return direction) for Rs9,900 or between the Chennai-Delhi-Patna sector (or in the return direction) for Rs11,940. Similarly, a passenger travelling under the special monsoon economy class return excursion fare of Jet Airways on the Chennai-Delhi-Varanasi can fly for Rs22,100. Under this scheme, the Hyderabad-Delhi-Jammu sector (or return) can be covered for Rs18,200.

The biggest 'P' of marketing
Industry experts say price remains the biggest part of travel and even though Air Deccan offers no frills it does offer television shows and recorded music to make the journey pleasant. Also in a two-hour journey most travellers don't need more.

Air Deccan's fares are 30 per cent lower than those of the established carriers. So far most of the airline's operations are restricted to flights between big metros and smaller cities, but the carrier plans to take on the major players soon with new aircraft on the main routes connecting the ig metros.

The airline has recently taken three Airbus 320 planes on lease to complement its fleet of seven French-made ATR 48-seater aircraft with which it plans to start operations on metros.

Air Deccan's, GR Gopinath has said he plans to keep cutting fares as the number of passengers for his airline rises.

It seems certain that IA Jet and Air Sahara would have to come up with their own low-cost tickets and not just seasonal schemes to remain competitive. At present the three airlines together command the largest share of the domestic aviation market but Air Deccan promises to start snipping away at their long held bastion.

For Indian travellers, no frills airlines are a bonanza as flights to destinations abroad are often cheaper on foreign carriers than those within the country on domestic airlines.