CAPA Symposium Highlights Low Cost Carriers’ Potential In India

Jyoti Koul - New Delhi

U K Bose

Sample this - Between 2000 and 2003, the capacity operated by low cost airlines globally grew by 69 per cent compared to an eight per cent fall in total global airline capacity. The number of flights operated by low cost airlines worldwide increased by 50 per cent from 2000 to 2003 to 42,490 per week. Aviation experts predict that the low cost airlines are a revolution on the cards. It will create a boom in the Asian skies with dramatic implications for the industry. The reasons being that low cost carriers are not only a solution for enhancing connectivity but also an answer to the overall regional developmental issues as it indicates a profitable proposition for airlines, travellers, tourism industry, hotels, local, regional and national economies. "Now that Asia is recovering from economic recession, it has high potential for mass travel and the answer is in low cost carriers," says Tan Sek Wong, assistant director, Budget Carrier Terminal, Civil Aviation Authority Singapore.

Back home, though the concept is in its nascent stage, the industry is already registering the change. After western countries where low cost carriers are becoming the order of the day, it is gradually gaining ground in India too. Following the runaway success of Air Deccan, the pioneer of the no-frill aviation phenomenon in India, four new players are entering the aviation sector. These new players include Alliance Air, Air-India Express, Kingfisher and Go. Entry of these airlines only indicates a new trend and a boom in air travel as well. "This promise of so much - unconditional - private risk capital invested by potential new entrants is simply too great an opportunity to be ignored. It offers a remarkable possibility to stimulate economic activity all across the Indian subcontinent - yet with minimal risk or cost to the government," said Peter Harbison, managing director, Centre for Asia Pacific Aviation (CAPA).

Taking The First Step

Realising the vast potential of the low cost carrier market, CAPA organisesd a symposium on low cost airlines in the Capital for the first time as it believes that low cost airlines would soon become a feature of the region's aviation scene.

The symposium aimed at underlining the issues involved in the operations of the low cost airlines. The two-day event highlighted the fact that the aviation industry in Asia Pacific will be transformed irreversibly by the expansion of the low cost airline phenomenon. While the impact on conventional airline strategies is an issue in the industry, CAPA (Symposium 2002 held in Singapore) is of the view that "the impact of low cost airlines will be to precipitate broader changes to airline operations overall, leading to a more sustainable service and operating formula."

Today, it is reflected in a starburst of investment initiatives in existing, new and planned airlines. While explaining the relevance and prospects of the low cost carriers in the Indian context, Harbison said, "India's vast potential has remained largely unfulfilled. Vested interests, regressive regulation and excessive bureaucracy have in the past combined to suppress the natural development of the travel industry. But today, the low cost airline revolution with its accompanying liberalisation has become an irresistible force."

The Growth Impetus

Keeping the ever-growing aviation market in mind why hybrid low cost airline types can work here, according to Harbison, because this new phenomenon is about much more than just low cost carriers. "It is about a regulatory revolution. This revolution derives its momentum from the overwhelming interest, which the low cost airlines receive from the public. Even though private investment in the market is sending signals to the government, just how soon will India witness this air travel revolution is anybody’s guess. While, in the last 20 years, China's domestic air travel market has grown by nearly 1000 per cent, India’s market is yet to double. The reason lies in the fact that Indian aviation has been facing many challenges. These challenges continue to exist in different forms even today."

Further, according to U K Bose, former CEO, Air Sahara, "The issues of domestic aviation are major deterrents to its growth. The airlines in the country pay a very high cost for fuel. The sales tax on air turbine fuel is too high. Other issues include regulations and red-tapism. However, the barriers for the low cost airlines in the country is primarily lack of adequate infrastructure, regulatory system, legal frame-work and route network. All these aspects need immediate attention in order to create a boom in the aviation scenario."

What Lies Ahead?

Bose does not deny the fact that low cost module is here to stay but according to domestic aviation experts, growth will be slow. However, apart from the regular infrastructure, these airlines have special requirements, which both the government and the operators need to focus on.

Dato Bashir Ahmed, managing director, Malaysia Airports Holdings Berhad, pointing out the needs and requirements of these airlines, mentioned, "Low cost airlines need special low cost terminals to ensure low cost operations. The requirements are so different from a conventional airline, especially the ground services which play a critical role in terms of the turnaround period which needs to be minimum (turnaround of aircraft in less than 30 minutes). Utilisation of the aircraft is the key as far as low cost carriers are concerned. Overall operating cost have to be low."

Malaysia is an example of a success story of a low cost airline namely Air Asia that has become a role model for the Asian market. India too needs to view its pros and cons more thoroughly in advance before it takes off.