LOW COST Airlines - Ready for Takeoff in India

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Authors: Sanjib Dutta
Senior Faculty Member
ICMR (IBS Center for Management Research).

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The low cost airline model which has been highly successful in the US, Europe and Asia is making waves in India now. The pioneer is low cost carriers in India - Air Deccan - started its services in September 2003 and many more (Kingfisher Airline (UB Group), Air India Express (Air India), AirOne (to be launched by a group of former Indian Airlines pilots), Visa (to be launched by a group of former Indian Airlines pilots) and Royal Airlines (ModiLuft's new venture) Alliance Air, Go (Wadias), are waiting for takeoff. The low cost model will redefine air travel in India in the coming years. In this article we will study the low cost airlines in the US, Europe and Asia and try to analyze the attractiveness of this model in India.

The low cost airlines model started with the US based Southwest airlines in 1973, and soon spread to the Europe (Easy Jet, Ryanair), Australia (Virgin Blue) and Asia (Air Asia, Valuair, Tiger Airways, Nok Air, Lion Air). The value proposition of low cost airlines has been faster connectivity at a cheaper price; transporting people from point A to point B in the shortest possible time at the most affordable price.

Southwest Airlines

Southwest's objective was to provide safe, reliable and short duration air service at the lowest possible fare. With an average aircraft trip of roughly 400 miles, or a little over an hour in duration, the company had benchmarked its costs against ground transportation. Southwest focused on short-haul flying, which was expensive because planes spent more time on the ground relative to the time spent in the air, thus reducing aircraft productivity. Thus it was necessary for Southwest to have quick turnarounds¹ of aircraft to minimize the time its aircraft spend on the ground.

Southwest limited the turn time for each plane to ten minutes or less. It has managed to limit airplanes' turn time to (about 20-25 minutes) over the years (Refer Table I.)

Table I
Aircraft Turnaround at Southwest

7:55	Ground crew chat around gate position
8:03:30	Ground crew alerted, move to their vehicles
8:04	Plane begins to pull into gate; crew moves towards gate
8:04:30	Plane stops; Jetway² telescopes out; baggage door opens
8:06:30	Baggage unloaded; refueling and other servicing underway
8:07	Passengers off plane
8:08	Boarding call; baggage loading, refueling complete
8:10	Boarding complete; most of ground crew leaves
8:15	Jetway retracts
8:15:30	Pushback from gate
8:18	Pushback tractor disengages; plane leaves for runway.

A quick turnaround strategy was more relevant to Southwest than to its competitors as it had a point-to-point flight between cities rather than a hub-and-spoke network.³ A hub-and-spoke system was characterized by longer wait time for both passengers and airplanes, more planes, extra computer systems, extra salaries to ground staff and additional commissions to travel agents. In addition, the airlines had to pay rent for the gates, as the planes were kept idle at airports waiting for the connecting flights. Recognizing these disadvantages, Southwest persisted with its point-to-point flights between cities. However, according to industry sources, a hub generates up to 20% more revenue per plane than a comparable point-to-point flight. Airlines with point-to-point flights had to be extremely cost-effective. There are many ways of being cost-effective such as cheap labor and cheap equipment. But Southwest chose quicker turnaround of its aircrafts.

Southwest discovered different ways to speed the turnaround of its aircraft. It used only one type of aircraft - the Boeing 737. This ensured interchangeability of crews, furnishings and spare parts, and maintenance was more uniform. It also used less congested airports to avoid disrupting flight operations and to maximize aircraft time in the air. It also offered limited services: no in-flight meals - only beverages and snacks. This reduced cost and turnaround time.

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1] Turning aircraft around as fast as possible to the gate to minimize the time that aircraft spend on the ground as ground time is non-revenue producing time for an airline.
2] A registered trademark for a certain kind of aircraft loading bridge, which allowed passengers direct access to an aircraft from the terminal.
3] A system for deploying aircraft that enables a carrier to increase service options at all airports covered by the system. It uses a strategically located airport (the hub) as a passenger exchange point for flights to and from outlying towns and cities (the spokes).