Airlines Shift Back to Full-Service Operations as Economic Growth Rebounds

Strategic Insights -

Airlines in India, including Jet Airways (India) Ltd. and Kingfisher Airlines Ltd, are gradually shifting back to full-service operations from low-cost services as the economy recovers and companies ease travel restrictions for corporate executives. This move is aimed at increasing profitability as revenue from business and first-class fares is higher than economy seats. According to the International Air Transport Association (IATA), the average one-way economy fares are now 15% higher than last year at $286, but are still 5% below their 2008 peaks. Full-service flights offer economy class and the costlier business or first class, providing special meals and extra legroom for passengers traveling in the latter.

Key Takeaways:

  • Jet Airways is converting at least 63 flights under its low-cost brand Jet Airways Konnect into full-scale Jet Airways flights.
  • Kingfisher Airlines Ltd's low-fare service Kingfisher Red is offering services usually associated with premium travel to front-row passengers.
  • Air India has deferred the introduction of a low-fare carrier for domestic routes.
  • Full-service flights offer economy class and the costlier business or first class, providing special meals and extra legroom.
  • Airlines had shifted to low-cost operations during the economic slowdown following the 2008 global financial crisis.
  • Jet Airways introduced Konnect in April 2009, offering tickets 10-15% lower than economy fares of the full-scale carrier.
  • Kingfisher Airlines shifted many flights under Kingfisher Red to beat the slowdown.
  • The trend seems to be reversing as airlines shift back to full-service operations.
  • Jet Airways will retain its Jet Airways Konnect to compete with other low-fare carriers.
  • Airlines are planning to induct more capacity to meet demand as fares increase.

Statistics:

  • Employees at the Essar Group, a Mumbai-based conglomerate, now predominantly travel business class for business trips.
  • The average one-way economy fares are now 15% higher than last year at $286 ('13,327.6).
  • Premium fares are some 20% below pre-recession highs.
  • The first-class category in Kingfisher Airlines is enjoying better occupancy rates.
  • Jet Airways has converted 63 flights to full-service operations from low-cost services.

Sources:

  • Sonu Kripalani, Vice-President of Passenger Sales in India at Jet Airways, in a letter to travel agents on September 6, 2010.
  • Nikos Kardassis, CEO of Jet Airways.
  • Deep Kalra, CEO and Founder of MakeMyTrip India Pvt. Ltd.
  • International Air Transport Association (IATA) in its July-August Airlines Financial Monitor report.