No true LCCs in India - Indigo Partners
(Mumbai, 13 June 2007) Providing the keynote
Bill Franke, Managing Director of leading airline investment firm Indigo Partners,
offered a frank assessment of the present shape of the Indian low cost sector,
saying government must do more to provide a setting in which the model can work.
Mr Franke stated that the viability of the low cost model cannot presently be judged in the Indian setting as “there is not a single airline in India that operates a true low cost structure. Under the current conditions, it’s not possible”
Looking at the systemic differences between the giant Subcontinent nation and the rest of the world, the respected investor noted that no Indian operators had deals in place with base airports to lower costs in exchange for passenger volume and that the lack of skilled manpower and infrastructure precludes high rates of aircraft utilisation, both critical elements of the model in Europe and the US.
These failings, he explained, combine with a situation where prevailing fuel taxes to push operating costs well over the low cost thresholds – with unit costs 50-75% higher than practitioners in the rest of the world.
Mr Franke added that he still sees great possibilities for the market, noting that, “the potential market is still vast, the economy remains robust and personal consumption rates are still rising. But there is still no true LCC to cater to the demand.”
Concluding his remarks, Mr Franke stated that the Indian Government must change course and facilitate the effective running of the airline business. “Only then,” he said, “will we get fares low enough to get people off the trains and into aircraft.”
The Low Cost Airlines Symposium, now in its fourth year, brings together the leaders of the extended Indian Subcontinent and Middle East LCC sector to examine the state of the industry and the trends shaping it.
More breaking news items from the Investor Summit
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