Along with low-cost carriers launching routes using narrow-body aircraft to overseas destinations within 5 hours flying time of India, full-service players are being forced to react with similar no-frills offerings on popular and profitable routes.
Budget airline IndiGo, that in June firmed up a $16. 2 billion order for 180 single-aisle Airbus plane, has received government approval to fly to Singapore, Bangkok, Dubai and Muscat, and is luring passengers with round-trip fares as little as Rs 9, 999.
By comparison, full service carriers charge between Rs seventeen, 000 and Rs 22, 000 for economy class Mumbai-Singapore routes booked per month in advance.
"The entry of IndiGo will help in growing the marketplace. Low cost carriers are creating a new market with a new variety of customers who did not fly international earlier, " said Kapil Kaul, leader for the Indian subcontinent and Middle East at the Centre for Asian countries Pacific Aviation (CAPA).
Under the aviation laws, an airline needs to in your area operate for five years before being assigned overseas routes.
Low-cost operator SpiceJet, along with just six international flights now among its 200 daily flights, plans to expand its overseas network and it has applied for several international routes, CEO Neil Mills said.
"Low cost carriers are much better poised to make use of the growth, because India is a very price-sensitive market, " Mills told Reuters.
Full-service service providers Jet, Air India and Kingfisher Airlines already compete on regional international flights with foreign full-service rivals for example Emirates, Thai Airways, Singapore Airlines and Cathay Pacific.
Low-cost carriers already flying international routes to India include Malaysia's AirAsia in addition to flydubai and Air Arabia, both based in the United Arab Emirates. Singapore Air carriers also plans a low-cost carrier.
AirAsia, which in June announced a report aircraft order worth $18. 2 billion, is expected to use much associated with its new fleet to link Southeast Asia to India and China.
Asia is expected to account for over fifty percent of global airline profits this year, according to the International Air Transportation Association.
FULL SERVICE, LOW FARES
Jet Airways, India's biggest carrier by marketplace share, said it plans to introduce more low fare flights on shorter international routes to defend myself against emerging rivals such as IndiGo and SpiceJet.
"Globally the push towards low-cost is actually real, " said Sudheer Raghavan, chief commercial officer at Jet.
"We uses the narrow bodied aircraft for low fare routes, " Raghavan said, talking about international routes under five hours.
Lucrative international routes have helped Indian service providers offset often loss-making domestic routes.
Jet's average revenue per passenger in April-June had been $112 for domestic operations, compared with about $275 for international operations, which account for over fifty percent its revenue.
Low-cost domestic competition from Spicejet, IndiGo, and GoAir has pressured full service carriers Jet and Kingfisher to ramp-up no-frills offerings. In trade for low fares, travelers pay for their meals, go without perks for example seat-back video monitors, and often get less leg space.
Struggling state-run Atmosphere India, meanwhile, has slashed fares in recent months in order to police arrest falling market share, adding to price competition.
Nearly three out of four tickets Jet sells locally is within the low cost segment, while Kingfisher Airlines is expanding domestic connectivity below its low fare brand Kingfisher Red.
Analysts now predict a pressure on international yields too.
Bank of America Merrill Lynch, in late July, said that the profitable international segments for legacy carriers are set to manage increasing competition on economy seats from low-cost domestic and international rivals.
"This sudden surge in LCCs (low-cost carriers) can keep the international economy yields under check, " the bank said.