Impact of Low Cost Carriers

Until quite recently, airlines was always a premium industry that was exclusive to the rich. Businessmen , corporates and rich people were the only ones who could afford airline travel. The price of a ticket even in late 90’s and early 2000s would come to around 5000 to 6000 Rs, even for economy class. When you adjust for inflation that was equivalent of 12000-15000rs today, which is mighty expensive

Compared to a 500 rs A/C train ticket, 5000Rs looked like a distant figure. People only dreamed of seeing an airplane, much less flying in one. Be it 200 Kms or 2000 Kms, the primary choice of travel was trains and if not available , a bus.

Thanks to high prices and low patronage, there were very few airlines that was operating around that time. Some of them were Indian Airlines, Air India, JetAirways and East-West Airlines. They had limited routes and was a full service airline. Full service airline meant everything from luggage to seat preferences and inflight meals was included along with the ticket

With rising fuel costs, operating expenses and airport rental charges, airlines needed a way to make more money. They had to come up with a different strategy to improve their occupancy rate
This was when two interesting things happened. One in the US and one in our own country

In order to make sure a lot of people flew, Herb Kelleher started an airline called SouthWest Airlines. Their strategy was denoted as “Nuts”, since they literally served peanuts in the flight instead of a meal. People were encouraged to bring their own boarding passes than having printed at the counters. The flights flew only to smaller airports near the city, than the mainstream ones. They started selling ticket prices at 39$ which was almost 1/3 of the fare of other airlines

Back in India, a retired Captain of the Indian Army had a mission to make airlines accessible for everyone. He stated that he wanted every single Indian to fly and he accomplished just that , with his airlines called AirDeccan. India’s first low cost airline, they started selling tickets for as low as 250 (inclusive of service charges and taxes)

The airline industry had a major impact soon after the success of AirDeccan. Though Kingfisher bought Deccan soon enough, it was enough to gain the momentum. Lot of other corporates began investing in budget airlines. Spicejet, Indigo, GoAir, JetLite were the result of this airline revolution.
The ticket prices from 10,000 gradually dropped to as low as 1200 for shorter sectors and around 4000 for long distance flights. Budget began cutting down on all privileges to make maximum profits and also ensuring that lot of people flew.

With railways increasing the ticket fares once in three months, rail travel became more expensive than some of these budget airlines. This price war had only a positive impact on passengers, who were able to get exclusive discounts and lower fares than ever before

Hopefully, with regular monitoring of the Airline authority of India, Budget Airlines can be the biggest boon for passengers and for the overall economy as well

This blog post is inspired by the blogging marathon hosted on IndiBlogger for the launch of the #Fantastico Zica from Tata Motors. You can  apply for a test drive of the hatchback Zica today.

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