Indian LCCs get thumbs up for growth

By Satish G. | eTN Asia
At a time when the burgeoning low cost carrier market in India is evoking bullish sentiments, testimony of such positive mood has been affirmed by Centre for Asia Pacific Aviation (CAPA). The association has stated that the LCC market share in India will reach 70 percent by 2010, making it one of the world's leading LCC markets in terms of total market penetration.

"Full service carriers are, on average, bleeding a remarkable 1.5 percentage points of market share every month to LCCs. We do not expect this rate to slow in the short term, given the profile of current fleet orders. LCCs could therefore control over 35 percent of the domestic market by the end of 2006 and pass 50 percent some time in 2H07," said CAPA chief executive officer – Indian Subcontinent and Middle East, Kapil Kaul.
 
"The Indian domestic market has been growing at almost 50 percent so far this year. The emerging untapped leisure/VFR sector will drive the domestic market to more than double over the next five years (growing at 25 percent annually) to around 60 million passengers by 2010 – and LCCs will gobble up most of the new traffic growth," said Kaul.
 
He added that high fuel costs, low yields and congested airport infrastructure pose major risks to the sector going forward and have the potential to place a major strain on airline finances.
 
"While we are not predicting a bloodbath, airlines will need to be careful with capacity and ensure they are well funded," he said.
 
Kaul said the launch of IndiGo in the past few days will keep the market growing strongly in the months ahead.
 
Indigo is the sixth airline to be launched since Indian government further liberalized the skies in 2003. Other than Indigo, six new players – Jagson Airlines, King Air, Mega Airways, Indus Air and Megapode Airline are planning to commence their operations.
 
IndiGo plans to focus on routes that have been ignored by existing budget carriers, said its chief executive officer Bruce Ashby. "By the end of this year, we will have six aircraft operating in 12 destinations. Our aim is to have 15 aircraft by the end of next year and carry 35 lakh (3.5 million) passengers with over 25,000 departures," he reportedly said.
 
According to media, IndiGo promoters are confident that the airline will post operating profits in 18 months. "With the disposable incomes of the middle class rising, the number of existing and potential passengers for each aircraft is huge. . . We are confident of reporting profits in 18-24 months," said Indigo founder Rakesh Gangwal.
 
Nearly 80,000 seats are being offered every day by all airlines catering to the domestic sector and an equal number of seats are likely to be added in the next two years.
 
The other players in the segment include Air Deccan, Kingfisher Airlines, SpiceJet and Go Air.

August 8, 2006   Posted in: India