Air India mulls no-frills service

June 08, 2009 13:20 IST

After domestic private air-carriers, Jet Airways and Kingfisher launched their all-economy services to tap low-cost travellers, state-run Air India may now enter the no-frill segment in the domestic sector to beat the downturn in the aviation industry.

"We don't see a turnaround in the industry at least before two years. . . we have to look at different business models. One of the options could be a low-frill model. . . if a decision is taken, it has to be Air India Express for the domestic sector" a top NACIL official told PTI.

While only 4 per cent of India's population travels by air, in Malaysia it is 50 per cent. Air India is exploring different business models to beat the downturn and one of the options could be the low-frill model, the official said.

Air India already operates its low-cost Air India Express (AIE) service on the Gulf and South-East Asian routes from several destinations in the country.

So far AIE has not entered the domestic sector, even though it has been planning to do so for quite some time.

But now it has been forced to look at this option seriously as in the current situation a business model has to be evolved that is, "low-cost, low-fare and meets the challenges of falling passenger demand, rising operating costs and excess capacity," the official said.

Recently, Jet Airways launched a new all-economy, low-cost service, Jet Konnect, on 54 domestic routes with eight aircraft to begin with. Over all, Jet Konnect plans to operate over 60 flights under this service, almost a quarter of its total capacity.

Jet's peer, Kingfisher Airlines too has dedicated almost 50 per cent of its capacity to its budget arm, Kingfisher Red.

Air India Express presently operates over 200 flights per week. Of these, 175 are across international destinations, 13 on the domestic routes and another 13 on behalf of Air India.

From an abysmally low 2 per cent market share during April 2007-December 2007 period, AIE's market share jumped to 6 per cent during February 2008-January 2009. The airline ferried over 2.25-million passengers in the just concluded fiscal as against 1.7-million passengers carried by it in FY 08.

AIE claims a load factor of on an average 75 per cent and providing connectivity from interior points of the country directly to major destinations across the two geographies.