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Low-Cost Domestic Airlines Planned in India - 2004-08-08

India's aviation sector is set for a boost with a host of low-cost airlines preparing to enter the market in the coming months. The concept of budget airlines is new in India.

India's only low-cost airline, Air Deccan, began operating in Southern India last year. Buoyed by Air Deccan's success, a number of other operators are preparing to take to the skies to lure budget travelers. These low-cost carriers hope to change the way Indians look at air travel.

Domestic airfares in India are expensive by global standards, due to high fuel and other operating costs. As a result, domestic air travel has been mostly restricted to business travelers or the wealthy.

But the chief revenue officer of Deccan Airlines, John Kuruvilla, says operators want to bring on board a growing middle class that has traditionally opted for cheaper rail fares. He says they are going after the railways' passengers. "India with a billion population has not even scratched the surface to get its consumers to fly, and the reason for this is [that] flying to date has been the domain of the well-to-do, but with the kind of fares we are looking at, we are looking at almost every Indian being able to fly," he said.

Analysts say only 15 million passengers currently take domestic flights each year.

The bargain airlines plan to offer fares as low as $15 for a ticket between cities such as Delhi, Bombay and Bangalore. They hope to cut costs by reducing in-flight services, packing more seats into the aircraft, and selling tickets through the Internet.

Worried by the competition that low-cost airlines could pose, several airlines in India have already cut fares between major Indian cities by up to 40 percent, for people willing to book tickets a month in advance.

Cheaper air travel is expected to give a boost to the tourist industry, which has long complained that expensive domestic airfares were deterring foreign tourists from traveling within the country.

Lower-cost flights will not be confined to the domestic sector, however. State-run Air India has announced plans to slash fares to the Middle East and Southeast Asia by 25 percent next year.

India has been reforming its aviation sector, which has failed to keep pace with an expanding economy, for some time. The government opened the domestic aviation sector to private operators a decade ago, and has now announced plans to allow foreign investment in this sector.