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State-owned Air India which is set to face increased competition from full service carriers Jet and soon to be launched Vistara in the coming months, has chalked out a dual-pronged strategy to up its market share in domestic skies.
Air India will deploy 787 Dreamliners to draw in corporate travellers on domestic routes. Meanwhile, the 19 A320s the airline is in the process of leasing would be utilized to add more capacity and services for economy class passengers.
Air India Chairman Rohit Nandan said, “We are looking at utilising the 787s more optimally by deploying them more on domestic routes. There are many airlines which use A380s for 2-3 hour flights now (it is meant to be used for long-haul flights of 8 hrs). World over the economics of operating an aircraft is important. If you use larger aircraft on short-haul routes, the engine wears off faster. As long as that is factored in while working out the route economics and you make money, its fine. Our route economics analysis takes into account the expenses incurred in maintenance of engines.”
The airline currently operates the 787s only on two domestic routes from Delhi to Bangalore and Kolkata. AI’s 787s have 256 seats each, 18 of the business class and 238 economy seats. The deployment of 787s on domestic routes would help the airline to improve yields.
According to industry estimates, business class seats typically account for 8 to 10% of the total domestic airline capacity but contribute 15 to 20% of its revenue. The average business class fare is three to six times that of an economy seat.
In other words, it means 18 business class seats would give you the same revenue as at least 54 economy passengers. That obviously increases the average yield per passenger. This makes it a lucrative business proposition if leveraged effectively.
Nandan, however, clarified the airline in not looking at deploying the Dreamliners on domestic routes in response to competition, “We are not responding to competition we have been thinking of this for some time. The 787 on domestic routes will be a game changer and will appeal to corporate clientele. We will charge the same as others in business class and offer a better product. It will offer better service and this is our USP”, he informed. While Vistara is going to operate A320s on domestic routes, Jet Airways operates Boeing 737s.
Additionally, Air India is also in the process of leasing 19 A320s to increase capacity for economy travel. “We will also intensify the use of A320s to other destinations. We have a whole network ready to be exploited. We could not do so earlier because of insufficient aircraft”, added Nandan.
The 19 A320s being leased will replace a similar number of older aircraft the airline has in its fleet. However, the new aircraft to be flown in all-economy configuration will offer more capacity of 180 seats. The aircraft being phased out currently offer between 144 and 168 seats.
Nandan further said that the airline’s prestige and acceptability has improved over the last three years and particularly after induction into Star Alliance. Currently, only five% of the airline’s passengers come from the government sector.
“The market has accepted us. Travellers are satisfied with us. We get only five% of our passengers from the government now, 95% of our customers opt to fly with us voluntarily”, he said.
Air India currently has 62 Airbus family aircraft (mix of A319s, A320s and A321s), used on domestic routes and some short haul routes.
AI’s domestic market share has fallen from 19.8% in January to 16.2% in August and the airline has not made additions to its fleet. It also has a shortage of Airbus A320 commanders.
At present Air India flies 16 Boeing 787s and flies these to Europe, Japan, Singapore and Dubai. It also uses them on two domestic routes, Delhi-Kolkata and Delhi-Bangalore. It has 27 Boeing 787s on order and is expecting three additional planes till March 2015. It is expected to use these to ply on other metro routes.
It has had some success and the 787s have helped it generate cash profits on some hitherto loss-making European routes.
However, the planes have also been plagued by snags and glitches, leading to their frequent grounding and operational delays. Also, the airline has not been able to get desired loads on its new 787 routes, to Australia, Rome-Milan and Moscow.
