Originally Posted by enjoystravel
We should not confuse yields with loadfactors. You can get 100% loadfactors if you offer all your seats at Rs. 1/- per seat. Spicejet does seem to have industry leading load factors - what is not clear to me is their yields. Are they on par with the industry (in which case the load factors are impressive)? If the load factors are at the cost of yields, then that is a whole different story.
The LCCs in India still puzzle me. In the US, when WN pursued the low cost model, it used secondary airports where the airport fee were lower and cost models were different with employee stock options, no defined benefits pensions, etc. It is not clear to me what edge Spicejet or AirDeccan has on the cost side. Air Deccan at least uses non fare revenues to bolster revenue but Spicejet does not seem to have any other significant revenue sources besides fares.
Excellent points and I have the same questions too.
The fixed costs of the newer full-service carriers and the fixed costs of the newer low cost carriers will, over the longer term, be in the same league. Per employee labor costs are in the same league, and only marginally lower for the LCCs. (They have less deadweight in that they use fewer employees, but labor costs are low compared to capital costs, once those hit hard.) And the more variable costs are basically in the same league save issues around catering and overhead-related ones. Distribution costs may be lower but Spice and Deccan still hit up the local travel agent market there (even though they avoided the GDSs ... at least the last I cared to check). Administrative costs are lower but that and the lack of international flight-related costs cannot explain the sustainability of the model. I think these good price days won't last forever; and what we are witinessing is the de novos going after market share by riding on arrangements that don't seem -- to me at least -- to provide sustainable cost advantages over the longer term.