The country's budget air carriers are lining up capacity expansion plans worth billions of dollars to beef up their domestic flights, particularly to non-metro cities where they see higher growth prospects.
About half a dozen low-cost airlines currently have an order book of close to 250 aircraft placed with Airbus, Boeing and other plane manufacturers. This includes a 100-aircraft order worth about six billion dollars by Indigo, 41 orders by GoAir and 90 by Air Deccan. Considering a list price of about 70 million dollars for Airbus' A320, one of the most popular aircraft with budget airlines, the planned expansion would cost them over 15 billion dollars.
The planned capacity addition by low-cost airlines is considerably higher than that of the full-service carriers, whose order book currently stands at about 120-130 aircraft. Besides, while most of the planned capacity addition by the full-service carriers like Jet Airways and Kingfisher is for overseas flights that of budget airlines is mainly for the domestic operations and that too for the non-metro routes.
"Over the last few years, metro-centric routes have reached a stagnation point in terms of escalation of passenger traffic. The next phase of growth in passenger traffic is expected to be generated from mini-metros," GoAir's Managing Director Jeh Wadia told PTI from Mumbai.
The focus on non-metro cities is already evident with most of the budget airlines offering more attractive offers and discounts for the non-metro routes, while also launching more number of flights to smaller cities. "As part of our mini-metro focus, GoAir recently doubled its weekly flight operations in key mini-metros," Wadia said.
GoAir now operates 21 weekly flights in Ahmedabad, 14 weekly flights to Cochin, 40 weekly flights to Hyderabad, 28 weekly flights to Jaipur amongst others, Wadia said. "It is important to have connectivity with metro cities, but our focus has also been to connect non-metro cities among themselves as well as with the metros," said SpiceJet Chief Commercial Officer Sam Sridharan.
"We have aircraft bases in cities like Ahmedabad and Hyderabad, from where we fly to a number of other cities," he said, adding that the airlines endeavour has also been to build frequency "as we believe that it is not just about the number of cities one flies."
According to a new report by global financial services major Citigroup on Indian aviation sector, "Low cost carriers will contribute to most of the incremental growth (going forward) and would account for about 50 per cent of overall capacity by 2010."
In 2007, the overall industry fleet is estimated to have grown by 42 per cent, with low-cost carrier segment seeing a growth of 51 per cent and full-service carriers expanding their fleet by 36 per cent. Kingfisher recorded highest growth of 145 per cent in full-service segment with addition of 16 new aircraft. Among low-cost carriers, SpiceJet and Indigo saw a growth of over 200 per cent, while GoAir recorded about 50 per cent fleet capacity addition. Industry experts believe that the next phase of passenger traffic growth in Indian aviation space would come from mini- metros like Bhubaneshwar, Jaipur, Nagpur, Hyderabad, Ahmedabad and Pune and would later spread to other smaller cities.
According to industry data, the average contribution from five metro cities -- Mumbai, Delhi, Kolkata, Chennai and Bangalore, has dropped to 14 per cent in first nine months of current fiscal from 15 per cent in the previous fiscal. While Mumbai and Delhi are estimated to have seen a drop in their contribution, that of Bangalore and Chennai have remained stagnant.
At the same time, the contribution of non-metro cities are estimated to have increased, although it still remains considerably low leaving significant potential for growth. In addition to the better growth prospects in these cities, the budget airlines are also getting attracted to the population there being more suitable for low-cost flights. Accordingly, most of the discount offers like Rs 500 tickets are for flights to non-metro cities, while they are also launching other packages like discounts in hotel bookings to near-by tourist spots. According to Wadia, as part of GoAir's focus on mini-metros, it has launched a flat all-paid fare of Rs 1,075 on Delhi-Jaipur sector.
"Through this offer, we expect an exponential conversion from road to air traffic. Our aggressive pricing strategy in the Delhi-Jaipur sector is in line with our growth strategy to escalate passenger traffic in mini metros," he said.
Wadia said that the strategy is already paying off and as a result of "all such efforts, GoAir's load factors averaged 83 per cent during the last nine months of current financial year... Our market share is on an upswing as compared to our market share during the previous season." GoAir's passenger traffic growth record in mini-metros during the last nine months was between 135-275 per cent in cities like Ahmedabad, Cochin, Hyderabad and Jaipur, while its all-India growth was just about 73 per cent.