| A Case Study | | | | cursory look implies it is not so much the airline |
| There has been much debate over where really lies | | | | industry that is suffering, but the full service airline |
| the problem with the airlines sector. Full service airline | | | | companies that are really facing the music. |
| providers are posting losses year on year while low | | | | What remains true is that these airlines are posting |
| cost carriers seem to be posting some profits. | | | | losses on a yearly basis. Kingfisher losses rose from |
| Airlines companies in India together posted a record | | | | Rs 158 crore in the quarter ended June 2008 to Rs |
| net loss of 44% in the last fiscal year. This is much | | | | 243 crore in the same period in 2009. Jet Airways |
| higher compared with any y-o-y losses seen in the | | | | posted profits of Rs 143 crore in this period in 2008, |
| past by this evolving industry. | | | | while they suffered losses of Rs 225 crore in this |
| Full service airlines are working to being down their | | | | period in 2009. The picture with low cost carriers was |
| cost available per seat km. According to a recent | | | | different during this period. SpiceJet revenues, for |
| study, this cost for full service airlines has come | | | | instance, saw an upwards trend. While they posted |
| down from Rs. 4.60 has fallen down to Rs. 3.02. | | | | losses of Rs 129 crore in the June 2008 quarter, they |
| Whereas, this cost for low cost carriers is Rs. 2.40. | | | | had profits of Rs 26 crore in that quarter of 2009. |
| While all airlines are working to cut their costs, full | | | | All these arguments point towards one straight fact. |
| service airlines are unable to do it to the extent LCCs | | | | Airlines that are working on controlling their costs |
| are. Airlines claim that steep aviation turbine fuel | | | | take the lead over competitors. Most have excessive |
| prices and expensive airport charges in the country | | | | capacity while customer traffic has gone down |
| are the primary cause for their losses. Aviation | | | | drastically. This is leading to tremendous suffering for |
| turbine fuel prices are very high in India compared | | | | airlines that worked full capacity till recently. Also, |
| with other countries in the world. Even so, they have | | | | Indians are keen to travel for as little as possible. A |
| substantially gone down over the last year from Rs | | | | high percentage of travellers prefer low cost carriers |
| 71,028 a kilolitre in August '08 to Rs 36,992 a kilolitre | | | | to full service airlines. This is turning out to be the |
| in the same month of 2009. The flipside is that most | | | | greatest challenge for full service airlines. Where Air |
| full service airlines in India also run international routes. | | | | India and Jet Airways had a passenger load of 68% |
| Fuel used on international flights is available at | | | | approx. for the quarter June 2009, Kingfisher had a |
| international prices. This gives the companies some | | | | passenger load of 72%. SpiceJet surges ahead of all |
| leverage in terms of fuel price as well. Are full service | | | | these carriers to maintain a passenger load of about |
| airlines conveniently ignoring this fact? | | | | 77%, while GoAir and IndiGo take a passenger load |
| In the last quarter, Kingfisher posted a loss of Rs | | | | of 85% and 82% respectively. |
| 243 crores in the quarter ending June 2009, whereas | | | | The most stunning proof of these developments is |
| Jet Airways said it suffered a loss of Rs 225 crores. | | | | that while low cost carriers are adding to their fleet |
| Contrarily, budget carrier SpiceJet recorded a profit | | | | and routes, full service airlines are reducing their |
| of Rs 26 crores. So while Jet Airways revenue | | | | capacities. There are some means airlines such as Air |
| slipped 18 per cent compared to the same quarter | | | | India, Kingfisher and Jet Airways have to come up |
| last year, SpiceJet revenue went up by 15 per cent. | | | | with to beat these circumstances. Because low cost |
| Fuel costs and airport charges remaining constant, | | | | airlines are here to stay. |
| there seems to be a huge gap somewhere. A | | | | |