The LCC Invasion-Part II

Bhisham Mansukhani - Mumbai

After the first phase of the Low Cost Invasion by Air Deccan, Kingfisher, Air-India Express, Air Arabia and SpiceJet, the second phase is just about to take off. The line up of new entrants includes IndiGo Airlines, Go Airlines, Tiger Airways, Magic Air, Paramount Airways, East West Airlines and many more. Express Travel & Tourism brings you an exclusive tete-a-tete with Rahul Bhatia (IndiGo), Jeh Wadia (Go Airlines) and Tony Davis (Tiger Airways) who share their vision for this segment in India...

We will adopt a travel agent first approach, followed by a web-based distribution model

Rahul Bhatia, MD, InterGlobe Enterprises, promoter of IndiGo Airlines

How would you position IndiGo against other new LCCs in the Indian market?

IndiGo aims at becoming the next Southwest. It is distinguished by the fact that its parentage has a very strong aviation and services background.

Is the order of a 100 aircraft a confirmed deal with Airbus? What is the structure of the aircraft delivery?

We have committed a firm order of 100 aircraft to Airbus. We are expecting between 15 and 19 aircraft in the first two years, and thereafter, an average of one aircraft every month.

How does IndiGo plan to fund its US$ six billion order for aircraft?

The start-up capital investment for this project will be in the range of Rs 350-400 crore. The purchase will be through the debt-financing route.

What is the rationale behind setting up IndiGo?

Firstly, the Indian market dynamics are strong. As a country, we are doing extremely well economically and the political will to open up the aviation sector and upgrade infrastructure makes a great business climate to operate within. Secondly, India has one of the least explored aviation markets in the world. We make 0.01 trips per capita as against 0.12 trips made in China, 2.20 trips made in USA and 3.20 trips made in Singapore. Given the geographic size of the country, our population, economic growth projections, increased consumer spending and traffic projections on all modes of transport, it makes perfect sense for a successful low cost model to emerge. Given our background in aviation services, we have what it takes to succeed.

Could you elaborate on the proposed distribution network for IndiGo?

We are currently studying various options for distribution. We will adopt a travel agent first, followed by a web-based distribution model.

What would the business model be with regards to both the trade and the consumer?

IndiGo is being positioned to fill the fast emerging need for reliable, efficient and economical air travel. All elements of our strategy- be it product, marketing, distribution, operations or customer service - will be to cater to this positioning.

We recognise the importance of the trade and travel agents that will be an integral component of our distribution strategy.

Why did you choose Rakesh Gangwal to promote IndiGo? Is he investing a significant amount into the airline?

Rakesh Gangwal is an aviation expert, having spent over 20 years at senior management positions at United Airlines, Air France and US Airways. We feel that his endorsement of the project, coupled with a world-class management team, will lead to a distinct differentiation in our product offering and business model. While IndiGo is jointly promoted by InterGlobe Enterprises and Gangwal, InterGlobe will have the majority stake.

Being an ex-US Airways employee, which is a full service carrier, what synergies could be formed between his prior experience and your new business model?

The synergies are by way of his diverse experience in the airline industry in a mature market, which will clearly help us achieve our objective of providing economical, efficient and reliable air travel. This is of course over and above the excellent relationship that we have shared for the past two decades.

We Are Keen To Tap Southern And Eastern Indian Cities: Davis

Charmaine Fernz - Mumbai

Tony Davis, CEO, Tiger Airways

With a host of carriers looking at the potential of Indian skies, is Tiger Airways looking at venturing into India? If so, when and which destination would you be looking at?

We will consider flying within a four-hour radius from our base so as to ensure optimum utilisation of both - our aircraft and service crew. Within this radius are a number of Indian cities particularly the southern and the eastern cities. We have undertaken feasibility studies that show which city will best serve our potential Indian customers from the 10 cities we currently service.

What is your strategy for success?

Tiger Airways is a low-cost carrier (LCC) and we follow the basic LCC business model. We keep fares low by maintaining our costs. We will maximise aircraft utilisation across our network of 10 cities in six countries, and will maintain stringent cost controls throughout our operations while providing a reliable and on-time service without compromising on safety and security. Increased air travel brings about mutual socio-economic benefits to Singapore and the Asia-Pacific region by developing its tourism and hospitality industry.

What are your plans for the coming year?

Tiger Airways will strive to maintain its top slot in the low-fares segment and will announce new destinations in the coming months. We have also purchased eight new Airbus 320s bringing our fleet size to a total of 12 aircraft. This will help us grow into a regional low-fare airline in the Asia-Pacific region. We believe in sticking to our true low-cost model. Competition is about delivering the best possible product at the lowest possible price and we are confident to be able to deliver efficient service for a long time.

In addition, we would like to see 'open-skies' policies among all countries in the future.

What according to you differentiates the LCC from the other airlines?

Tiger Airways has the largest network of low fare destinations served from Changi Airport, Singapore. We will keep our fares consistently low; our lead-in fares are as much as 80 per cent lower then full service airlines, and passengers who book early with us enjoy a host of discounts.

Indian Travellers Have Changed Their Mode Of Transportation: Wadia

Charmaine Fernz - Mumbai

Jeh Wadia, MD, Go Airlines

A prudent financial investor and an aviation enthusiast, Jeh Wadia - MD of Go Airlines - is passionate about the new airline. Citing a host of factors responsible for the conception of the airline, Wadia's dream is to commodify air travel. In an exclusive rendezvous with Express Travel & Tourism, Wadia talks about his strategy for his dream airline.

When every inch of the Indian skies is sprouting a new low cost airline every month, one more launch seems like no surprise. So what would set this one more product apart from all the others? A focussed strategy and a lot of passion. "With a population of one billion, India has a huge middle class that still remains unexplored. And my primary aim is to get these people to travel," says Wadia.

He says that travellers across the country have changed their mode of transportation with a definite incline towards air travel. Lower prices have helped but what has also helped this shift is a change in their mindsets. "It is all these factors and much more that has strengthened my belief in launching Go Airways," Wadia adds.

The Travelling Pyramid

Reminiscing about the past, Wadia says that he had actually worked on an airline executive summary in 2000, which for some reason did not work out. "It was only in 2004 that I re-opened this summary and decided to put my thought into action," he adds.

Elaborating on the strategy of his airline, Wadia says, "One only has to look at the travelling public pyramid and realise the vast opportunity that it offers. The customer base that we plan to target lies at the bottom of this pyramid that has a huge untapped base." The primary focus for Go Airways would therefore add up to railway passengers travelling in I/II/III-tier AC and Volvo bus passengers.

But they are still working out the cost structure and supply strategy for the airline. "Since low cost aviation is a high volume but low margin business, it is tricky to sustain a profitable business module," Wadia informs. Although it plans to begin operations by September-October this year, it is still in talks with aircraft leasing companies. "We have a two-pronged strategy. Initially, we will lease about 20 used A320 aircraft but go on to place 20 firm orders for new aircraft by 2008," he divulges.

Quality is Important

Low cost carriers, without dispute, stimulate the market and help bring the price down. Go airways, therefore, plan to follow the Ryan Air model with an all-economy configuration. Wadia says, "And as far destination is concerned, we will begin with the western and southern regions followed by the north and the east. But what we will really stress on is quality service and time efficiency. But we will let our actions and delivery speak for it."

Apart from online bookings and web transactions, Wadia will also look at agents and tour operators since the trade constitutes a big share of the market. But as far as its public presence goes, Go Airways has yet to finalise on its tagline. "We have narrowed down three options: The People's Airline, A Value Choice or A Smart Choice," Wadia concludes. It remains to be seen what will work for the buyer.