With Tata-SIA's Vistara, AirAsia set to fly, airlines eye losses as rivalry rises

Aug 20 2014, 10:38 IST
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Tata-Singapore Airlines brand logo 'Vistara' unveiled at an event in Delhi. (Photo: FE Online) Tata-Singapore Airlines brand logo 'Vistara' unveiled at an event in Delhi. (Photo: FE Online)
SummaryTata-Singapore Airlines' Vistara, Air Asia India, four-five new airlines could start operations soon.

Sensing stiff competition from Vistara, a full service offering by Tata Sons and Singapore Airlines, Air Asia India and four-five new airlines which could start operations from the next financial year, incumbent airlines are gearing up to meet the new challenges that could potentially widen their losses.

Naresh Goyal, chairman of Jet Airways, recently announced that his airline will close down its no frills service, Jet Konnect, to focus on a single brand full service carrier strategy to bring the airline back into profitability by the financial year 2017.

“Jet Airway’s economy offering will be defined and will be competitive with that of the other domestic carriers and low-cost carriers”, said James Hogan, chief executive officer of Etihad Airways and a member of Jet Airway’s board of directors, at a recent event in Mumbai.

Aviation experts note that while JetKonnect clearly needed to notch up more market share to break even, the advent of Air Asia India—known for its competitive pricing—could have persuaded the management to do away with segment altogether.

Jet Airways, which lost some of its market share to low-cost carriers, is looking to increase its market share in the full service segment, said Sharat Dhall, president of Yatra Online Ltd.

With the arrival of new airlines, experts say, a blood bath is imminent, especially among the existing airlines whose finances are in a bad shape.

“You can expect further predatory pricing from airlines to attract passengers when these new carriers finally launch”, said an aviation consultant who didn't want to be named. “As a result many of the existing airlines will further bleed financially and the sector could see some sort of a consolidation in the coming fiscal”, he added.

However, existing airlines are already gearing up for the competition. Kalanithi Maran-controlled no-frills carrier SpiceJet, the second largest domestic carrier in terms of passengers carried, is working to achieve profitability by garnering a greater market share and reducing costs, a strategy that will help the airline in the future.

SpiceJet has started filling up empty seats by offering heavy discounts, which have ensured that fixed costs like taxes and fuel charges are recovered, even if the airline doesn’t make any profit from those seats.

A senior SpiceJet official said a part of the airline’s turnaround strategy is to lure corporate customers. In the recent months, SpiceJet has also emphasised on on-time performance (OTP) and better customer services—like travel discounts in future for flight delays. The airline

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