Less Is More

The advent of competition in the no frills airlines segment means good news for business travellers, writes Kapil Kaul

Recently, after I first travelled by Air Deccan, India's first low-cost no frills airline, the sentiment after the journey was - 'it's okay'. Though a reaction like this would be a point of worry for a mainstream airline, for the no frills sector, it means in all probability a repeat customer. The flight sans all the usual pampering services suited my bill as a frequent traveller. There were leather seats, four drop-down plasma TVs showing news capsules and some TV programmes, while I used the table to do a little bit of my own work. No, they didn't serve food and that was okay with me because a one-and-a-half hour flight didn't really make me feel famished. So, all in all a productive flight.

And there's good news for people like me who don't mind too much the 'no frills'. After Air Deccan showed the way, suddenly there has been a flurry in the Indian skies. Many entrepreneurs are thinking of treading the low-cost, no frills path and it's a long list which includes Kingfisher, Wadia Group, Royal Airways, Best West, Inovs Air Visa Airways and Inter Globe. The other converts are the government owned Alliance Air and Air-India. The Air India Express is contemplating to follow the same model, specially for the Kerala traffic to the Gulf. The low cost airlines want to use a model of no business class, fewer cabin crew, internet sales and no free food. Of course, you can buy it from the food trolley if you want.

The 'no frills' concept, when it took off, was a roaring success in the west. The term 'low-cost-airline' originated in USA in 1971 when South West Airlines began to operate flights between Dallas, Houston and San Antonio. Ten years later, the fleet consisted of 22 aircraft. Twenty years later, the company had sales of US$ one billion. Today, some 33 years after the first flights, they transport 64 million passengers annually. South West is currently the largest domestic operator in the US and has never operated at a loss. A total of 30 per cent of all air travel in the US is provided by low-cost airlines. The primary objective was and remains faster connectivity at a cheaper price - to transport a passenger from point A to B in the shortest possible time at the most affordable price. Which means no in-flight services, no cabin crew to welcome you onboard or serve hot towels, no piping hot meals and no plush interiors. There will be one or two airhostesses on board since it is mandatory by law that there should be an airhostess or a steward if the number of passengers is more than 10.

Europe's history of low cost airlines is considerably shorter. It wasn't until 1997 that the European Union deregulated the European airline market. Estimates suggest that the portion of low-cost passengers is currently less than 15 per cent, which means that the European market is still largely untapped. Great Britain is the exception, where Ryan Air and Easyjet have already brought low cost traffic up to 40 per cent. The rest of Europe is believed to have similar potential. The world-over, the low cost airline phenomenon is beginning to transform the face of aviation and tourism industry. In fact, many governments now acknowledge that the greater national good can be served by extending affordable air travel to more people, leading to tourism benefits and accelerating economic development.

For the no-frills airline, the trick lies in the cost structure. While the cost can be as low as 4 to 5 cents per available seat miles in case of carriers such as Air Asia of Malaysia, the expense of full service airlines is 12-15 cents per available seat miles. The success of the model lies in the ability to cut costs by deviating from the traditional way of operating. Smaller aircraft for short-haul sectors, reduced service costs, elimination of business class and selling tickets directly through call centres and the internet, all add up to a tidy profit. They offer fares, about 40-50 per cent cheaper than full service airlines, offering almost 100 per cent of the services, which attracts passengers. Another strategy that leads to lowering costs is utilisation of secondary airports (instead of operating from Heathrow, Ryan operates from Gatwick), which charge lower landing and parking fees and offer a faster turnaround time - say the percentage of flights offered is on an average 30 per cent more. This often poses problems for business travellers as they have to undertake may be an extra hour of travelling.

India Scenario

The Indian travel scene is fast undergoing a metamorphosis with more disposable income resulting in increased travel. However, even though there has been a transformation, the Indian psyche remains unchanged - value for money rules. Bearing this in mind, how will the concept catch on in India? Sample this: Deccan Aviation, the only low cost operator in the country, has grown from two flights a day to connecting 54 destinations by ATR (smaller aircraft) and seven destinations by Airbus in a matter of eight months. Deccan Aviation, with a 78 per cent load factor and operations in five states, hopes to post a revenue of US$100 million by the end of the fiscal. The success of low cost airlines (LCAs) has been accompanied by a huge interest of external investment in new no frills airline ventures. The investment has been bolstered, too, by early evidence of potentially strong returns and relatively easy entry. In India, liberalisation has made businessmen expand bases and set up operations at cheaper localities, which are, however, poorly connected. These airlines will offer connectivity links between smaller cities and major metros which in turn will help usher in industrial development in those states.

Secondly, a low cost carrier in India will make travel a feasible option. A new set of customers from the lower end of the market will be generated. Globally it has been observed that LCAs has led to 200 per cent increase in market size and passenger base. Air Asia now flies 3 million passengers. In the next three years, LCAs in India will touch the length and breadth of the country. Deccan's airfares are in the range of Rs 1,700 (US$ 36.9) to Rs 3,200. Recently they have launched a Rs 500 fare scheme, but to get such benefit one has to book well in advance. However, in India there is not the inconvenience of travelling to the secondary airport as of now. Here, the Air Deccan counter is near Jet and Sahara and they use the same airport. However, there are people like Karun Budhraja, DGM, marketing and corporate communications, Amadeus India who is not so thrilled with the no frills experience. “My experience of the Chennai-Hyderabad sector on the Air Deccan was really not the most exciting one. the in-flight experience was quite upsetting right from the word go. The take off was bumpy just like a mini boat being lost in rough seas while on the air it vibrated so much that one could hardly hear what your co-passenger was talking about. During the course of the entire journey, the contraption swayed like a pendulum and a hot air balloon and the grand finale was the thud landing (well I am glad to be back in one piece) which opened the cockpit doorto the horror of all passengers,” stated Budhraja.

Many ask the question that with international airlines constantly innovating to offer its passengers incentives by the dozen, be it flat beds, multi-cuisine options or even faster technology, where do low cost carriers stand a chance? The fact is smaller businessmen and professionals in India want to go from point A to B in the shortest possible time, are not looking at luxuries. I am a frequent traveller and time is an essence for me. From a business traveller's view I don't require the service drama on board. I want to take my boarding card and get on the flight within 20 minutes. In the one hour of travel time, passengers are not worried about what they are going to be served. If I want food I can buy it from the trolley when it comes.

Easy Booking

Simplicity is the word that can describe the booking process in no frills airlines. And it is this simplicity that has caught the fancy of both business and leisure travellers. One can book on the internet, pay through credit card, take the print out of the ticket, go to the airport, identify oneself and take the boarding pass. While regular airlines use the Global Distribution Model for ticket booking, no frills airlines have created an Internet-based model at 1/10th the cost. Take the example of Air Deccan. It has a 24-hour call centre based in Bangalore and local numbers for each region like Bangalore, Hyderabad, Chennai, Mumbai and Delhi. Therefore, when a customer makes a call, it is a local call charge for him. Thus, they have only one centre for the entire country rather than having centres all over, which saves costs. The call centre is linked by a Virtual Private Network (VPN) on the internet to the reservation system, which in turn is linked through a VPN to the Citibank terminal for payments. A customer cannot make a reservation without paying. The customer then gets a reservation number, which he has to present at the airport to get a boarding pass. One can also get a ticket via the computer. Tickets can also be purchased from travel agents to whom the customer has to pay and the travel agent in turn uses his credit card to make the payment and gives him the ticket. This is for those who do not have access to Internet.

Changing Times

Traditionally, no frills airlines such as Easy Jet and Ryan Air have offered bare-bone service, unimpressive interior design, unassuming food for which passengers have to pay, and on-board entertainment mainly consisting of crew members telling 'knock-knock' jokes. But things are changing. JetBlue of USA has roomy all-leather seats, each equipped with free live satellite television, offering up to 24 channels of DIREC TV programming, which will soon be up to 100 channels of free digital satellite radio and pay-per-view movies. Or consider Delta-owned Song's in-flight menu. Passengers still have to pay for their meals, but the food is from quality brand names.

However, the success of Indian no frills airline business is largely dependent on the government's central policy and the ability to provide aviation infrastructure at key Indian airports. As of today, there is no parking bays available in all the major airports in India and the government's response is dismal. We cannot have Air Deccan moving ahead from three A320 aircraft to even a couple more because of lack of infrastructure available at Delhi, Mumbai, Chennai and Bangalore airports.

(With inputs from AninditaChattopadhyay, New Delhi & Charmaine Fernz, Mumbai)