Opinion - Editorials   

End of cheap air travel?

With the cost of aviation turbine fuel escalating sharply, India’s domestic airlines are lurching from one crisis to another. Hardly a week passes without one airline or another marking up its fares or reporting heavy losses. Already, some of them have pruned the number of their flights and have hinted at further rationalisation, which invariably means scaling down. Those are steps in the right direction but are too few and probably too late from the standpoint of th e industry’s health. What is at issue is the business model adopted by the new low-cost carriers (LCC), whose era began with Air Deccan in 2003.With the overriding objective of grabbing market share at all costs, the airlines — even the full service carriers had to follow suit because of the competition — offered promotional fares that were unviable. Global petroleum prices have more than doubled over the past one year. Since the price of ATF is not controlled and no government is likely to subsidise them, the airlines had necessarily to pass on at least a part of the burden to the passengers. This predictably resulted in a sharp drop in the number of passengers and, as a consequence, heavier losses to the operators. Although fuel price hike is the most proximate cause for the airlines’ financial predicament, a recent report by the rating agency Crisil suggests that there are other equally potent factors that would have dragged down most of the low cost carriers anyway. Even if crude prices were to drop significantly, many airlines would not be able to recover their fixed costs unless they hiked their fares.

For all practical purposes, the era of inexpensive flying that saw even non-business passengers preferring to travel by air has come to an end. Air tickets on most trunk routes are substantially higher than they were a year ago. Airlines would have been better off had they not gone in for multiple aircraft operation. Suicidal competition ought to be avoided at all costs. Already, some welcome steps have been taken towards rationalisation of basic fares and flight schedules. India is probably not the ideal place for low-cost carriers. There are, for instance, no separate airports or terminals. There are very few avenues for economising; the much-touted no-frills service, smaller cabin crew, and the absence of frequent flyers programme have not helped the LCCs to carve out a profitable niche. For domestic passengers, it is hoped that some of the significant benefits received in the wake of competition will remain, although air tickets at throwaway prices will not be one of them.

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

Overcoming the skills deficit
End of cheap air travel?
Strengthening the prosecution system
A betrayal of India’s constitutional vision
A massacre remembered after years of silence
Obama’s foreign policy speech serves notice on Pakistan
Corrections and clarifications
What a deal!
Disturbing
Speaker’s office

Copyright © 2008, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu