Low-cost carriers look at loyal fliers to increase market share

NEW DELHI: The struggling low-cost carriers (LCCs) are borrowing a leaf out of their full-service brethren���s business book ��� the popular frequent-flier programmes (FFPs). Currently, LCCs in India such as GoAir, SpiceJet and Deccan don���t have a structured, full-fledged FFP in place and they try to lure passengers through limited-period special offers on tickets and freebies. But increasing competition within LCCs and from a resurgent Railways too ��� with railway minister Lalu Prasad Yadav announcing a 4-7% cut in AC first and second class fares in his budget speech on Tuesday ��� is making many LCCs to look at loyalty programmes as a way to shore up revenues and build brand stickiness in a market hitherto driven on price alone.

Says GoAir MD Jeh Wadia: ���Just look at the difference between RyanAir and EasyJet in Europe or SouthWest and JetBlue in the US. While one tries to be the cost and price leader, the other is increasingly targeting business segment and frequent travellers. With this premise, yes, loyalty programmes make a lot of sense, especially if you want to position yourself in the second group.���


For the first nine months of 2007 about 32 million people took to air in India (a growth of 36% over 2006) with the LCCs (currently five) accounting for over 45% share. Even though projected passenger demand for the next four years remain healthy, the industry is already battling overcapacity. As against domestic seat capacity of 54.8 million (April 2007 to January 2008), airlines carried just 36.7 million passengers during the period, a load factor of around 67%. LCCs believe that the launch of FFPs will help improve load factors, besides snatching market share vis-��-vis full-service carriers.

Loyalty Pays

GoAir is in the final stages of launching a complete mile-based frequent flier programme by next month. As of now, GoAir has a programme, GoSurprises, where SBI card owners earn reward points if they fly the airline. Deccan too has started scratching the surface of loyalty path after its merger with the full-service carrier Kingfisher Airlines. ���While on-time performance and competitive pricing is far more crucial to retain travellers, loyalty programmes have a role to play as value adds,��� admits a Deccan official. Deccan offers freebies) on booking return tickets.

Kingfisher Airlines, which has over 4-lakh passengers enrolled in its FFP, believes that such programmes add value to the product. Airlines��� executive V-P Hitesh Patel impresses on the need for an FFP. ���A majority of tourist traffic to Hawaii Islands earn the trip through FFP reward points!��� The airline spends around 3% of its revenues on FFPs.

JetLite CEO Gary Kingshott feels that it will be tough for LCCs to set up a frequent-flier programme. However, he feels that due to acquisition of a full-service carrier (Sahara, which was turned into an LCC and rebranded JetLite), they are in a unique position. ���Our passengers by virtue of flying Jet (Airways) can earn Jet Privilege points even on JetLite.���

Good Money after Bad?

According to a recent report by Centre for Asia Pacific Aviation, India���s airlines may have lost $500-million last year. Deccan reported a net loss of $105.9 million for the 12 months ended June 2007 compared to a $85.8-million loss in the 15-month period between April 2005 and June 2006 (the company reported a 15-month period as it changed its accounting year midway). SpiceJet reported a loss of Rs 21.37 crore for the quarter ended February 2007.

Then there is also the issue of newer airports, such as the upcoming airports at Bangalore and Hyderabad, insistence on levying stiff development fee on every passenger deterring LCCs to curtail their flights to these cities, further straining their finances. Says SpiceJet marketing V-P Kamal Hingorani: ���Though for an LCC introducing a full-fledged FFP may not be a viable option, we���ll for sure introduce some innovative programmes soon.��� The Gurgaon-based airline recently organised an all-expenses paid trip to Goa for it���s 60 frequent fliers (along with their spouses).

Steve Arsenault, director worldwide sales, iLoyal, feels that after 9/11, airlines in the US and mainland Europe had to face tough times which resulted in spinning-off various features attached to airline management such as reservation business and loyalty programmes. ���It���s the era of coalition marketing, where airlines are exploring tie-ups with different hotel brands, car reservation and credit cards,��� he says. Mr Arsenault believes that in India too LCCs have to follow this model sooner than later and for that they need to have a customer database and the right marketing programme, the building blocks of an FFP, anyway!