A recent study by Centre for Asia Pacific Aviation (CAPA)
suggested that IndiGo, the single largest domestic airline by
passengers, has also become the most profitable in India.
The
study pegged IndiGo’s profitability in the first quarter of this fiscal
at Rs 106 crore, which is double the profit that SpiceJet declared and
more than three times what legacy carrier Jet Airways reported for the
same period.
A careful analysis of the fare monitoring routinely
done by the regulator Directorate General of Civil Aviation (DGCA) will
perhaps explain how IndiGo’s market leadership also translated into
profit leadership. According to the data for July, IndiGo tickets were
the most expensive on most sectors compared with average industry fares
on these sectors.
Many times, IndiGo demanded a premium even over
full service carriers such as Jet Airways. Put simply, this means IndiGo
has begun commanding a premium for its enviable on-time record and
simplicity of operations.
The DGCA monitored fares on only tier 2
cities. So most popular routes like Delhi-Mumbai were not tracked. But
it is clear that IndiGo has begun charging a small premium on even these
less populous routes.
Its fare on Delhi-Bhubaneshawar last month
was Rs 7,242 against industry average of Rs 7,221 and when even
full-service Air India was a bit cheaper at Rs 7,207. Delhi-Dibrugarh on
IndiGo cost you Rs 9,425 against industry average of Rs 8,361 and when
Jet Airways (full service) was ready to fly you for much less at Rs
7,754. Delhi-Vishakhapatnam on IndiGo was for Rs 7,479 against industry
average of Rs 7,190 when Air India cost much less at Rs 6,946 and
SpiceJet was also a little cheaper at Rs 7,144.
The DGCA’s fare
monitoring cell tracked 48 sectors, IndiGo operated flights in only 11
of these sectors but was found to be the most expensive in 8 of these
sectors.
IndiGo is not just charging a premium on fares, it has
raised tariffs on various ancillary activities also to generate more
revenues. So from June this year, the airline has begun charging Rs 50
for duplicate ticket print outs. Also, it had revised cancellation fees
to Rs 950 for domestic and Rs 1759 from international travel beginning
April this year.
IndiGo has also started an “IndiGo Plus”
programme whereby a passenger can get a meal on board and choice of seat
for additional payment of Rs 600.
An executive with a travel
website said internationally it was a normal practice for low cost
airlines to charge extra for seats where there is more legroom
available—like the first seat in an aircraft—but fares for these seats
are not as high as business class fares at full service carriers. And
IndiGo was just following this international practice.
Meanwhile, a
story in Business Standard last week pointed out that one of the
reasons for IndiGo’s unprecedented success is its decision to increase
capacity by 29 percent since last October—the highest among all
airlines—when SpiceJet and GoAir increased capacity by 14 and 11 percent
respectively.
The story went on to explain that despite having
lesser nuber of aircraft than Jet on domestic routes (IndiGo has 57
while Jet and JetLite have 97), IndiGo is able to offer higher capacity
as its planes are 180 seaters.
But IndiGo has also been facing
cost headwinds like the rest of the aviation industry stakeholders. The
CAPA report quoted earlier has cautioned that despite the all-round
robust performance, IndiGo needs to “apply some focus on is ensuring
consistency of service levels as it continues to expand.
The
pressure of rapid growth is beginning to impact the customer experience
at some key stations, although IndiGo’s overall customer satisfaction is
still highly rated.”
As per DGCA data, IndiGo commanded 27
percent share of the domestic market share in July which means it
carried about 12.5 lakh passengers last month. It also managed to fill
its aircraft the most, with seat factor of 75.5 percent or two in three
seats.
The only other airline which reported seat factor of over
70 percent was JetLite with 71.7 percent, with Kingfisher Airlines at
the bottom of the seat load pecking order with just half its aircraft
occupied at any time.
Source: http://www.firstpost.com
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