Blame low demand in many sectors analysts say revenue loss will be greater with the switchMihir Mishra / New Delhi Apr 07, 2012 BS
Government-owned Air India has begun changing the configuration of a substantial number of its short-haul aircraft to all-economy seats.
Of the 62 Airbus-320 family of aircraft, AI has started converting 14 to single-class configuration and to decrease the number of business-class seats in 43 others from 20 seats per aircraft to 12.
“We have already converted one of the aircraft to single configuration and the conversion of others is in process. These will be operated in connecting smaller cities that do not have any business class traffic and the business class seats go empty,” said a senior AI official, who did not wish to be identified. “We will be able to increase our capacity (with this) by at least 10 per cent. This will help us in increasing our revenue in sectors where business class seats have no takers.”
The domestic market currently offers around 10 per cent inventory in business class and the rest in the economy category. It has seen a decline in business class seats due to curtailment of flights by Kingfisher Airlines and addition of capacity by various low-cost carriers. Domestic airlines provide a little over 200,000 seats a day. Till six months earlier, 15 per cent of the inventory was business class.
Kingfisher had entered the winter schedule in November last year with a permission to fly 420 flights a day operating 64 aircraft. Due to financial trouble, it started cancelling flights and now operates 120 flights a day, with 20 aircraft, — 10 Airbus 320s and 10 ATRs. The latter are smaller aircraft and offer no business class seats.
ECONOMY MORE ECONOMICAL ?
Airlines in India are slowly but steadily changing aircraft configuration, replacing business class seats with economy seats
* Out of over 200,000 domestic seats on offer daily by airlines, around 10% are business class seats. Six months back, business-class seats were 15% of the daily seat offer
* AI is decreasing business class seats in 57 out of 62 aircraft of the Airbus 320 family. The exact reduction in AI’s business seats offer is tough to calculate as each aircraft has different utilisation.
* Since November, Kingfisher, which flew a 2-class configuration, cut its operations from 420 flights a day to 120 flights. IndiGo and SpiceJet, low cost carriers with all-economy configuration, added capacity in the market during the same period.
* Analysts feel that reduction in business class seats would take away pricing power from airlines as economy-class seats are competitively priced
Meanwhile, IndiGo added 10 aircraft, with 180 seats each. SpiceJet is adding smaller aircraft to provide regional connectivity.
Analysts, however, feel AI’s move to decrease the business class inventory won’t help the airline. “Their move to increase economy class seats will ultimately impact their revenue. Today, business class seats can provide pricing power to airlines, as economy class is getting highly competitively priced. And, there is a demand for business class seats and that demand will continue to stay,” said Ajay Prakash, president, Travel Agents Federation of India, which represents half of India’s travel agents.
He said revenue from two business class seats would match the revenue from 10 of economy class. “It would not be a right move to remove business class seats at a time when Kingfisher has curtailed a lot of their flights and their business class passengers have only Air India and Jet Airways left,” he added.