Wednesday, January 14, 2009
Low-cost carriers show maturity in new year
Amongst this, an interesting trend that got me thinking was the evolution of Indian low cost carriers (Indigo, Spicejet,Jetlite,Go Air), who have gone ahead to provide what the customer wants, as opposed to what he can pay for.
They have also started using products and services as market differentiators, as against the earlier practice of using price points.
LCCs are no longer toeing the line of positioning themselves at mere price point of Rs 2,999 or Re 1 per ticket. Instead, to drive loyalty, they have raised the tempo for building awareness on flight connections, schedules and in-flight services.
Recent shifts in the corporate strategies of LCCs include the introduction of business class to attract corporate travellers, the positioning of flight services and network as choice points, innovative radio and television advertising campaigns that focus on in-flight services, a wide selection of reading material and hot meals on board.
Interestingly, they are also offering flyers the chance to earn frequent flier miles, something uncommon in the LCC business. This is a stark difference to how LCCs started off in 2005. I personally am pleasantly surprised that they no longer contest rail ticket prices nor adopt aggressive pricing strategies.
They have also stopped talking trash in the market (remember the hoardings that came out in Mumbai of "We\'re Changed" and "We Made them Change"?) and haven\'t deployed frivolous capacity.
Airlines in India have finally realised that what might have worked well in the West does not necessarily work here. While travellers there might be more practical, back home, anyone who sets foot in an aircraft demands to be pampered, and rightly so.Pricing strategies too have adopted market dynamics and what consumers want as service.
Today, instead of negotiating for an overpriced snack on-board, the cost of a light meal is \'secretly\' billed in your ticket price. So, while you\'re impressed on getting a free meal, the airline is actually making additional revenue by billing everyone on board, instead of only those who would have opted for it.
Additionally, keeping the base fare flexible and maintaining a constant fixed revenue element is also working right for airlines. The Rs 3,200-3,800 in the ticket charged as the \'fuel surcharge\' might put off customers, especially when fuel prices have plummeted over 60%. However, in a market where oil pricing is dynamic and revisions are expected twice a month, the element of fuel surcharge works more as a minimum revenue assurance per seat. This creates elasticity in ticket pricing.
In the year ahead, airlines will mature and realise that whether they are an LCC or a full-service carrier, the Indian passenger wants to be pampered. It does not require complicated strategies to run an airline, all it takes is common sense and an uncanny intuition to understand what sells, as opposed of what you can offer.So, welcome aboard, your coffee and favourite newspaper awaits!
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