Are cheap air tickets coming to a premature death?

The era of flying at the cost of a rail ticket may soon be a phenomenon of past for Indian travellers. After picking up Air Deccan, Kingfisher’s Vijay Mallya is going for a price hike upto Rs.500-700 per ticket in addition to the Rs.150 congestion charge (for flying in busy Delhi-Mumbai airspace) to make the Low Cost Airline (former?) turn profitable.

Similarly, JetLite (formerly Air Sahara) is also planning to operate on international routes and provide similar levels of comfort as Jet Airways with single seating class configuration, thus forcing an inevitable price rise.

With rumours of premium carrier, Paramount Air acquiring LCC GoAir, the price war in Indian aviation industry would certainly abate in future and service reliability, comfort and on-time performance would be chief differentiators. But the price rise would take time as presently there is enough supply to meet the demands.

Data has also indicated that inspite of reduced prices, the actual penetration of airline passengers hasn’t increased as only 9% of passengers on LCC are first-timers. Kingfisher has a valid reason to believe that low cost must exist only if the airline is profitable.

The next price war in airlines would be on international routes with several Low-Cost Asian carriers planning flights to India, and Air Deccan and JetLite starting flights to Asian countries. The newly created consolidated entities Air Deccan-Sahara, Air India-Indian and Jet Airways-JetLite would stand to gain the maximum as they can provide free link to smaller cities from larger cities through their budget carriers.

In future, aviation industry in India may see the rise of value carriers, which is positioned between a full-service and budget carrier and offer some “frills” including water and snacks, as they provide the best value proposition for the Indian traveller.