September 28
Indian aviation was the mainstay of the rich and the famous and the honchos till 5-7 years back when yield management was not around, and almost all tickets on a trunk route such as BOM-DEL would cost you upwards of INR 10K (US$ 200) for a 700 miles flight. And then came Air Deccan, the first low-cost carrier in India who launched in 2003 and everyone was forced to drop prices to get a share of the passengers who wanted to get on a plane thanks to Deccan’s INR 1 (2 Cents) and INR 500 (US$ 10) tickets.
Air Deccan’s success in gaining mindshare and marketshare led to the launch of other LCCs in India such as Spicejet, Indigo and GoAir. It also forced the hand of the big guns of Indian aviation such as Jet Airways and Kingfisher Airlines who operated in the full service space and charged a premium to fly their planes.
Air Deccan did not last a lifetime, as it burnt cash while expanding and opening new routes in India. It got eventually acquired by Kingfisher Airlines in 2007, and they operated these planes under the Kingfisher Red brand. Kingfisher Red was the low cost operation of Kingfisher, essentially an all-economy configuration, where you had an AVOD screen and a small snack/meal thrown in. Kingfisher took great pains to explain that it was not operating in the low-cost space but it wanted people to believe that it was a full service flight at a low cost. Agreed. But Kingfisher was the original believer of the concept of selling low-priced tickets, considering the bidding it made for Air Deccan at various points of time in 2005-2007.
Jet Airways launched Jet Airways Konnect in 2009 in the midst of the economic crisis globally, to operate planes with more economy seats and zero premium cabins in India. By dropping ticket prices they were able to fill up planes in the dark days and keep the lights on. With this experiement working out, they put more and more planes on the Konnect branding. Of late, they have put 8 Business class seats back on these planes and serve hot meals to the pax in the front.
The interesting part is how these strategies are working out for the airlines. Some bean counters and number crunchers eventually drive the strategy forward after looking at the cold numbers in the quarters behind them. In a shift of strategy, these two airlines have taken a 180-degree opposite stand on the future of their low-cost operations this quarter.
Jet Airways, in August 2011, decided to put more seats to work on its planes, and while announcing its results for the June quarter, also announced that it will move up about 85% of its capacity into the Konnect brand, from the present ~70%. The airline says that the low-cost operation has worked out well for it, and it will also look to put out Konnect planes on the short-haul international operations. Understandable, for instance, on the MAA-CMB route. I took a flight on this segment in April 2011, and I was not surprised to see only one passenger in the Premiere section. Jet’s planes to the Middle-east destinations, such as Muscat, are usually full of price-sensitive traffic, and it makes sense to knock off those Business class seats in the plane and fly more passengers instead.
On the other hand, OW member elect Kingfisher has gone the other way. While announcing results today, the airline made an announcement that it is discontinuing the Kingfisher Red services shortly. The guy who owns the airline feels that there are more than enough people in the country who would be willing to pay for a full service experience, and so they need to attack that market rather than be the price warrior. The arguement, is that yields in the full-service are better.
This is an interesting turn of events. The service quality of Kingfisher, which advertises to be a 5-star airline as per Skytrax, is dipping by the day. Jet Airways, on the other hand has a consistent experience for travellers. On the other hand, no AVOD on most Jet Airways planes.
Who will get this round is what I am interested in for the time being. Because that will dictate which airline I fly domestically in the coming year. Bring on the strategy wars, baby! Yeah! Round 2, START!
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