"India's new aviation environment has all the ingredients for success"

Monday, March 21, 2005

OP/Ed
Will low-cost airlines survive in India? 
The new aviation environment has all the ingredients for success  
By JASON BITTER 
India - The Financial Express
 
 
The answer is yes. All of the ingredients exist for the success of the
low-cost airline sector in India. The market is very large, dramatically
under-served, and mostly over-priced to meet the price demand for low-cost
air travel. Moreover, the other modes of transport in India do not meet
customer demand for short duration low-cost travel. In every market where
these conditions existed, low-cost airlines have flourished. These include
the United States, Canada, Australia, Malaysia, Europe, Indonesia and
Brazil. 

The low-cost airline concept is universal. However, each market has its own
specificities which dictate several variations on the overall concept, which
remains intact in all of the successful low-cost airlines globally. 

India does have some market specifics which make achieving an absolute
low-unit cost challenging, but our company has identified many ways to lower
costs significantly from the current methods of doing business. 

I have heard many observers point to the infrastructure and regulatory
environment as reasons why an airline cannot be low-cost in India. This
argument has some merit, but it does not preclude the low-cost model from
being implemented in India. 

While it is true that the Indian airport infrastructure is less than
adequate, this is being addressed with a massive improvement programme,
which includes improvements to the air traffic control system (ATC) and
airports. There are many examples of improvements that are ongoing and being
made rapidly, such as the new domestic terminal in Ahmedabad and the recent
increase in the runway capacity in Mumbai and Delhi. This will continue to
improve as the plans continue to be implemented. 

The growth level of air traffic is largely dictated by the pace of this
improvement, but as a new low-cost airline, we believe the pace of this
improvement will be sufficient to accommodate our expansion plans in the
years to come. As a company focused on the long-term potential, we support
the current initiatives and are working on others to improve efficiency hand
in hand with infrastructure to implement a true low-cost airline model in
India. We plan to continue to focus on improving our productivity in the
Indian environment. Achieving this requires some changes to current
practices. However, we are addressing this and have identified many ways to
achieve maximum efficiency. 

We also support some reforms of the cost environment and are encouraged by
the recent decrease in the aviation turbine fuel (ATF) tax. This is another
encouraging development and is indicative of the government's commitment
towards liberalising Indian aviation to support the long-term viability of
the air transportation system in a competitive environment that delivers
consumer value. 

Yes, low-cost airlines can be successful in India. The challenges currently
are real, but are not insurmountable. The progressive changes recently made
clearly show that conditions are ripe for the increase in sustainable
low-fares for Indian travellers. And more importantly, for those Indians
wishing to travel, but who do not because of long train rides or expensive
air travel. 

This new environment will allow more Indians to explore their own vast and
diverse country with its many offerings, provide business opportunities for
small business people, and unite families apart in different cities who see
each other infrequently. 

The writer is the chief operating officer, SpiceJet


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