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While low-cost carriers (LCCs) have grown aggressively to take nearly two-thirds of air traffic in India over the past five years, these have also been rather cautious in expanding abroad.
However, with the local market continuing to be challenging and consultation on for removing the limitations on being eligible to ply abroad, this could change. An airline needs at least five years of plying at home and 20 aircraft before applying to fly abroad, the '5/20 rule'. International operations contribute only 11 per cent and 12 per cent SpiceJet's and IndiGo's revenues, respectively. The former is now looking at charting routes to offbeat destinations abroad.
IndiGo is not. Said a senior executive, "It is a conscious decision to go slow on international operations. The domestic market is crying for capacity. The number of domestic air passengers is projected to go up from 62-65 million to 110 mn over 36-40 months. It is only a matter of how many people come in at the right cost to grab that opportunity."
International business is projected to grow to account for a fifth of revenue at SpiceJet by the end of this financial year. "Lower taxes on ATF (aviation turbine fuel) on international and regional routes certainly help in making operations more viable. The risks of operations are much lower. We are looking at adding flights to CIS and Southeast Asia over the next few months," said a senior executive.
Mumbai-based GoAir is waiting for a waiver on the 5/20 regulation to start international operations and improve aircraft use. "We have started work on a business plan. The destinations we fly to from India will depend on traffic rights available. We already fly our aircraft 13.5 hours a day and if we have to improve productivity, we need to fly in the night as well. The idea is to improve utilisation by flying on international routes. The Gulf is a possibility," said a senior executive. A recent report by the Centre for Asia Pacific Aviation (Capa) says LCCs might focus on routes up to four hours for three-four years.
"The four-hour range enables airlines to leverage their domestic fleet by operating overnight, thereby improving aircraft utilisation and maximising economic performance and commercial viability," says Capa.
Further, the introduction of the re-engined A320neo and 737 MAX aircraft from 2016 could change the economics of longer regional international operations, as a result of the improved performance over an extended range of over six hours.
