Low-cost flights between Hong Kong and India arrive as budget carrier IndiGo tests waters
- Airline sounds challenge to traditional carriers with new low-cost business model centred on smaller planes over longer distances with refuel stops
Low-cost flights between Hong Kong and India have arrived as budget carriers get creative to challenge traditional airlines’ passenger volumes and profits.
The move is part of an “experiment” by India’s largest carrier IndiGo to offer cheap long-haul flights using smaller planes over greater distances, including midway refuel stops, its chief commercial officer William Boulter told the Post in an exclusive interview.
His comments came with the debut of IndiGo’s Bangalore to Hong Kong route last week.
Late last month, fellow no-frills carrier Spicejet also launched flights between New Delhi and Hong Kong.
Boulter said: “We are in a test phase and to an extent experimenting with some of these routes. The Hong Kong route is an example that stretches the A320neo [Airbus model].”
The main competitors on routes between Hong Kong and India are the city’s Cathay Pacific Airways and Cathay Dragon, which fly to six destinations in the country, and other full-service carriers Air India and Jet Airways.
In the same vein, IndiGo plans to use a low-cost structure to launch flights to London with its existing fleet, with a stopover for refuel at either Baku in Azerbaijan or Tbilisi in Georgia, by the middle of next year. In doing so, it could offer cheaper tickets and expand more aggressively internationally without using larger twin-aisle planes – which it doesn’t own or operate.
“We pride ourselves on having the lowest cost among operators in India ... And that enables us to always be competitive. Any price that is put into the market, we will match,” Boulter vows in a challenge to traditional airlines.
Citing carrier Norwegian, Boulter said: “At this stage, we’re not really going into the long-haul low-cost sector in the same way with wide-body [twin-aisle] jets. Wide-bodies are an aspiration for us but not a reality at the moment.”
Norwegian converted from a small European budget carrier to an airline flying across the Atlantic Ocean to North and South America, adding wide-body jets for its rapid growth. But the high costs of expansion has put it in financial peril.
Instead of spending upwards of US$250 million or more on large new jets to go the distance non-stop, IndiGo is taking a more prudent approach, using its existing planes with fewer seats at less risk to the company.
“One can do market studies … but until you [start] the route and understand the competitive dynamics, it’s always tough. But that is what makes the airline industry more interesting,” Boulter said. “We are confident our narrow-body approach will be helpful in terms of profitability.”
If IndiGo succeeds, it would potentially open up long-haul routes in Europe and Australia that were not seen as feasible with smaller planes. This could signal a new challenge to traditional airlines.
Generally, Indian carriers are increasingly looking abroad to earn more money as a saturated domestic market coupled with low fares, high taxes and a weak Rupee are harming the sector. A number of airlines have fallen victim to the challenges and others are under threat.
For now, IndiGo said it was satisfied with early sales of its Hong Kong route. “Looking forward, through the rest of December and into January, we’re pretty happy with 65 to 70 per cent of seats sold,” Boulter said. The average for the airline is 84 per cent.
“No one knows if there is an appetite for such flights at the moment,” said Ajay Awtaney, editor of LiveFromALounge.com, an Indian business travel and aviation focused website.
“IndiGo has been indulging in outpricing their competitors on the lower end on domestic flights, so if they run a lot of deep discounted fares for an extended period, people may start to notice them for long-haul flights with a stopover.”
Meanwhile, the worst of engine troubles that have grounded numerous popular single-aisle Airbus jets seems to be over, according to Boulter. The so-called neo (new engine options) models, an update of the A320, all require maintenance checks and fixes.
“The issue has largely dissipated,” Boulter said. “It is still a factor and we are changing engines more frequently than we would like. Reliability is not at the levels that were promised, but it is not affecting our operational day-to-day performance any more.”
The neo family of Airbus single-aisle jets form the backbone of overseas expansion for IndiGo, which is the largest operator of the new aircraft type flying with redesigned fuel-efficient systems.
But the advanced engines delivered by maker Pratt and Whitney ran into major teething issues. Also, such models are under more strain in India due to the unique climate.
Locally, Hong Kong Express overcame the similar issues with the same engine type, which forced them to ground jets and delay delivery of new aircraft, while the city’s regulator placed restrictions on how long such planes could fly over water to the nearest diversionary airport.
Since the interview with the Post, IndiGo said it would add a software upgrade to its neo jets after one of the planes had to execute an emergency landing last week because of smoke in the cabin.
The carrier operates more than 200 aircraft, mainly Airbus narrow-bodies, to 64 destinations mostly within India.