In what could be good news for passengers, another fare war seems to be brewing between India's low-cost air carriers. Following the launch of JetKonnect - a new low-cost arm of Jet Airways – on Friday, Kingfisher Airlines is now planning to operate more flights on the routes its low-cost arm Kingfisher Red covers.
Jet Konnect flights would cost 10 to 15 per cent less than regular Jet Airways flights, while rival Kingfisher Red flights offer a similar price difference advantage over its full-service parent. JetKonnect, according to the airline's officials, would help improve the passenger load factor of the airline by nearly 30 per cent.
The general belief in the industry is that the large airlines are trying to take a slice off low-cost brands without losing the premium image of their flagship flights. But fully low-cost carriers Spice Jet and Indigo are confident that the move India's two leading carriers would not dent their market share.
Last month, Kingfisher and Kingfisher Red had a combined market share of 27.1 per cent, followed by Jet Airways and JetLite (formerly Air Sahara), which had a combined market share of 25.4 per cent. State-run Air India had a market share of 17 per cent, while Spice Jet and Indigo accounted for 12 per cent and 13.4 per cent market respectively.
''We have a dedicated customer base, and even corporate houses now repose a lot of faith in the low cost carriers at times when there is cost cutting all over,'' a SpiceJet official is reported to have said.
Nonetheless, there are early indications that IndiGo and SpiceJet will respond aggressively to the development. ''Given our cost structure, we can go down even further. Our assessment is that the introduction of this low-cost airline by Jet will increase the gap between revenue and cost further,'' an IndiGo official reportedly said.
JetKonnect would connect 38 destinations on routes already covered by Jet Airways.
Kingfisher and its affiliate plan to do the same. Jet officials have made it clear that Konnect is a sort of emergency measure to cope with the downturn, and could even cease to exist once demand for air travel picks up.
According to the IndiGo official, the cost difference between operating a fully low cost carrier and a 'hybrid' carrier is as much as 30 per cent. While Jet has started offering low fares, it has not reduced its cost except that of free meals on board. Their distribution cost, manpower cost and expenses of maintaining the aircraft are still the same, the official said.
Jet, however, disagrees. The cost difference of operating low-cost and full service airlines are not more than 10-15 per cent, Jet Airways vice-president (revenue management) Raj Sivakumar has said. It hopes to play on the volume game and maximise its revenue by increasing the number of passengers and seats. An all economy configuration gives airlines more seats on each flight.
While a JetKonnect ticket from Mumbai to Ahmedabad for 20 May can be booked at Rs3,128 (inclusive of taxes and surcharge), SpiceJet and Indigo offer tickets for the same date and sector for Rs 2,479. ''We are doing what we believe is right for customer and shareholders. We believe that LCCs would not engage in a fare war that would go against the interests of the industry. Depending upon further developments, we will take appropriate measures to keep our revenue flow intact,'' Rajkumar said.