Page 15 - AAA JANUARY- FEBRUARY 2013 Online Magazine
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FEATURE INDIAN LOW COST CARRIERS
charged by full-service carriers are states, with multiple political parties all
currently on par with LCCs. bringing their axes to grind on the topic.
The other key issue for the LCC “It’s a real challenge, as the government
companies is the pricing of aviation fuel, is trying to convince states to give up tax
with India’s high prices a result of federal revenue in return for economic benefits
taxes, oil company mark-ups and sales such as more tourists and business
tax applied at state level. “India has 28 investment,” says Somaia.
states, and each sets its own rate, which “If agreement can’t be reached,
can range from 4% to 30% across the the government has one mechanism
country,” explains Somaia, adding that available, though its introduction would
the most expensive state is Gujarat. He be highly unpopular,” he continues. This
notes that Delhi and Mumbai account for would mean the government would
ABOVE: In early 2012, 40% of all domestic traffic, and charge change the classification of fuel into
SpiceJet had a fleet of 47 20% and 25% respectively. one that is a declared good – that is, a
aircraft comprising Boeing
737-900ERs, 737-800s and substance of strategic interest. Then
Bombardier Q400s. That Drop in the tanks states have to apply a 4% tax, he says.
may soon change, as later The main problem is that the central The problem is the implementation
that year, the company was government doesn’t have the authority is not straightforward, as it requires
allegedly negotiating an to set these taxes, and changing them approval from the petroleum, finance
order for 30 to 40 737 MAXs requires getting consent from all 28 and commerce ministries, in addition to
ROOM TO GROW
Director of Starair consulting harsh Vardhan argues that Indian Lccs are not truly
Lccs. “Excepting high-density seat configuration and the absence of an on-board
meal service, they haven’t introduced any innovative products along the lines of
those offered by international Lccs like AirAsia or Ryanair,” he notes. Even the
segregation of airport infrastructure – airport terminals for Lccs, faster check-
in and disembarkation facilities – has yet to take place. “In fact it would be more
appropriate to define them as low-fare carriers rather than low-cost carriers.”
Vardhan asserts this is likely to change as the Lccs are starting operations in
international sectors, with SpiceJet recently announcing new routes to china and
Dubai. “Lccs will have to redefine their business model and product offerings.
however, I believe that the Indian market has a large capacity and enough
travellers wherein both models – Lcc and full-service carriers – can coexist.”
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