Airlines target smaller destinations

With increased congestion and cut-throat competition on metro routes, airlines are ramping up their services to smaller destinations. Kingfisher, for instance, added 90 new flights to non-metro destinations in 2007. Arch rival Jet Airways operates 44 daily flights to mini-metros.

Vijay Mallya's budget carrier, Simplifly Deccan, was the pioneer in picking up and dropping passengers from small towns and cities. It added five more mini-metros to its network last year. The airline connected destinations such as Silchar and Aizwal in the north east and gave the industrial town of Jamshedpur its first air connectivity. After launching its first flight to the steel city in August, it added another in October.

"On the long haul flights to metros, it is difficult to always garner load factors. On the other hand, short haul routes are good in terms of margins," said Ramki Sundaram, chief financial officer and acting CEO for Deccan, adding: "But short haul routes have to be well thought out in terms of traffic density and extent of competition."

The growth is also reflected in overall numbers. While the share of metros in total passenger traffic slipped from 15 per cent in 2006-07 to 14 per cent in 2007-08, the share of mini-metros improved from 1.66 per cent to 1.73 per cent during the period.

Interestingly, while traffic to smaller cities is rising at a fast clip, Mumbai has recorded a 5 per cent drop and Delhi 2 per cent in overall traffic contribution. Bangalore and Chennai airports have stagnated in their contribution to traffic growth.

The recent offer of Rs 1,075 on the Delhi-Jaipur route by GoAir is driven by the logic that Jaipur's contribution to domestic air passenger traffic is on an upswing.

Cashing upon this trend, the airlines have been maximizing yields and garnering higher margins on these routes. Now, with the reduced jet fuel costs for shorter sectors, the carriers are keen to keep up the trend. Most low cost carriers are now flying about 50 per cent of their total routes to the mini-metros and are able to garner load factors of up to 80 per cent.

What is working for the airlines is the fact that taxes and surcharge remain constant irrespective of the long or short haul flights. And because there are few players on the sectors, airlines can charge premium fares.