Conventional airlines in India are positioned to target the business segment, which is not so price sensitive. The leisure segment, on the other hand, tends to be extremely price sensitive. If domestic tourist destinations have to retain their viability they have to achieve a high level of low-cost airline connectivity. Steady economic growth is generating an inspirational push amongst consumers. Air travel apart from being inspirational is also timesaving especially for distant destinations.
On the other hand the scheduled airlines are not willing to fly to smaller towns, primarily because they fly mostly Boeings and Airbuses, which are uneconomical for short-haul flights. Since airfares are high, most leisure travelers are forced to use an already over-burdened train system. Our airline service would be designed to capitalize on this gap in the domestic airline traffic.
The airline sector is vibrant. Indian carriers placed over US$12 billion in new aircraft orders. Air India, Jet Airways and Indian Airlines all are profitable despite the high price of fuel. The number of carriers operating in India has grown from two state-owned players in 1991 to 11 today Traffic is expanding rapidly. The Indian market for international freight expected to grow by nearly 10% annually over the next five years.
The growth of low cost carriers (LCCs) in India is arguably the single most important factor currently shaping the airline industry in the region. Even though the market penetration for LCCs is relatively under developed it is expected to reach new heights with new routes reaching major regional cities from the point of origin
The emergence of the low-cost airlines would be two-fold -to make air travel affordable, and penetrate deep into the country. This will be done by encouraging low-cost airlines. Refer Diagram 1
Reasons for growth of airline industry:
• Globalization of trade
• Growth in economy
• De-regulation and liberalization
• Enhancement in business profits
• Rise of Service class
Some of the constraints on the low-cost model can, no doubt, be eased by regulatory changes and the development of airport infrastructure. But this alone will not be enough. Budget carriers in India will have to evolve a unique business model of their own and this can happen only through trial and error.
All this does not mean that low-cost carriers will not take off in the Indian context. It only means that there are unlikely to be any overnight successes among the scores of airlines now busy shopping for aircraft, in preparation for a low-cost foray.