However, here is a caveat. We are witnessing some suicidal tricks in the market with freebies being offered. The fun and games have just begun. The LCCs are taking one other head-on in their early stages of growth, said Air Deccan chief operating officer Warwick Brady. He was addressing the Second Annual India & Middle East Aviation & Tourism Investor Summit organised by CAPA here on Friday.
In this high volume and low margin aviation business, further growth will depend on the carriers ability to reduce costs and be profitable at the same time. Spicejet Director Ajay Singh said, Tariff stimulation will be the key to increase in volumes for LCCs just as in the case of Indian mobile telephony. However, glaring issues like high landing charges, ground overheads and government taxation need to be addressed first. Landing and airport charges in India are also among the highest in this region especially when the charges are compared to competing countries.
At present, the cost differential of tickets between LCCs and legacy carriers in India is around 37% while the difference is 60-65% in developed countries.
Ground handling, engineers and security personnel contribute to a major part of our operating expenses. In the present system, security handling can only be outsourced to approved authorities like Air-India and Indian Airlines. However, they charge much higher than a normal security agency would charge, said GoAir MD Jehangir Wadia.
There are around 400 security personnel in Air Deccan, which could be halved in case of a suitable policy change on the issue, added Mr Brady.