Companies warm up to budget carriers

The economic slowdown has made companies look at low-cost carriers with new respect. As a result, corporate travellers now constitute over 35 per cent of the traffic on LCCs, up from ten per cent a year ago.

This has caused LCCs to record passenger load factor in excess of 70 per cent, though overall traffic has fallen 10 per cent in the last one year. Full-service carriers, in contrast, are known to have lower PLF of around 60 per cent.

This, according to the Centre for Asia Aviation , an aviation consultancy, will help the country's LCCs achieve cash breakeven in the third quarter of this year. This of course assumes the trend of corporate travellers switching to LCCs will continue and jet fuel prices will remain under $50.

"LCCs have changed their strategy and have successfully attracted corporate travellers to their fold. Most companies are cutting travel budgets in the slowdown and are looking for cheaper alternatives to full-service carriers. So the LCCs are largely unaffected by the slowdown," said Kapil Kaul who heads CAPA in India.

CAPA has pointed out that while their fares are 30-40 per cent cheaper than full-service carriers, LCCs offer 90 per cent of the service which their higher-priced rivals give. According to Kaul, estimates show that the EBITDA of most LCCs has shown a slight improvement in the months of April and May.

LCCs have clearly shifted the focus of their strategy to woo corporate customers. SpiceJet said that about 30 per cent of its passengers are now corporate travellers and about 70 per cent of them fly frequently and are regular passengers, which makes them more attractive. 

SpiceJet Director Ajai Singh said: "We have consciously taken care of the key requirements of corporate travellers which were earlier not being met by LCCs like easier cancellations and flexibility on rescheduling flights. Also, with our expansion of the network, we now offer flights to all the destinations that a corporate traveller would want to go to."

Singh said that SpiceJet has set up a special team to deal with corporate travel and is offering discounts to companies which give large volumes of business.

One key requirement for corporate travellers is a pan-India network, and that has been taken care of by the recent expansion in LCC capacity. 

LCCs increased their capacity by around ten per cent in 2008-9 which includes new aircraft, better utilisation of existing aircraft and expansion of operations to newer locations. During the same period, the overall capacity in the country has fallen 12 per cent primarily because full-service carriers have cut flights. 

More important, full-service carriers have withdrawn flights in peak hours and these slots have been taken over by LCCs. This has helped LCCs offer flights during peak hours -- a key requirement for corporate travellers which was not available earlier.