Indian LCCs show signs of technology adoption
Published: 28 Mar 2008
India Distribution Special
Low cost carriers in India are making steady progress towards technology adoption, terming it as imperative development for their business to stay ahead of the growth curve.
Recently, Deccan (Air Deccan) signed a deal with Amadeus, which has a market share in excess of 50% with a penetration level of nearly 20,000 booking agents, to improve its distribution network. It has already signed up with Abacus, which marked the first GDS adoption by an airline in the India's LCC market space.
Providing an insight into these deals with GDS, Sagar Rathod, Head Distribution, Deccan said Deccan's partnership with Abacus is an important milestone in the airline's growth and future plans.
"We believe that the GDSs offer a certain value to Deccan and Abacus was the first to offer a solution which is designed for LCCs at an extremely competitive cost. We hope it would produce great results. We are looking at this cost as opportunity cost which gives us the ability to sell across the Asia Pacific region where Abacus has a strong market presence," he said.
Rathod, in an interview with EyeforTravel.com's Ritesh Gupta, said that the GDS see the LCCs as a big opportunity to grow market share, as the LCC market share has grown from 0 to close to 33.5% (as of December 2007) in the span of three years.
"If this trend continues, it's in the interest of the GDS to distribute LCC content. Also, there is already a sharp rise in passenger numbers which is the Deccan effect and the other LCCs capitalised on this growth opportunity. In India, Deccan leads the competition in the LCC segment has been at the forefront of innovative distribution and otherwise, going forward we believe that if we offer the right product to the business traveler through the GDS the SBU and corporate would find it attractive to book," he said.
GDSs like Amadeus in India are strengthening its agent network every year and a key development is number of agents growing from relatively lesser-known cities. On this, he said, "We are looking at leveraging them for managing corporate traveler. In terms of travel agents and air travelers from Tier II/ III cities, that will be managed by the our direct distribution ability and route to market."
On how to reduce cost of content collection to enable effective distribution choice, Rathod said he would be selective in product offerings unless the distribution channel is open to reason and deals, one needs to get creative to manage costs.
"The airlines are fast moving their lowest fares to their own website in an effort to shift from indirect distribution to direct distribution so as to manage this ever growing distribution cost. The percentage of bargain hunters who use their credit cards to buy online are low as opposed to those who use travel agents and willing to pay a few dollars more, plus the human factor a traveler always takes comfort from the fact that there is an agent who has managed is very important business trip/holiday and has an existing relationship with the agent this is a paradox the airlines face. The traveler will eventually realise that the best deals come from airlines who know how to manage their costs best, selective product offering creating a customer centric product and offering this through the right channel would in time get the hybrid mix right," he said.
Talking about consumer, Rathod agrees that today's travelers are not a LCC customer or a traditional customer, but rather the modern traveler who mixes and matches based upon the requirements for that journey and their perception of the value of the product on offer.
"These are new age air travel consumer, I believe like every other aspect of the aviation business distribution also should be consumer-centric. We approach our distribution requirement with a strategy to compliment the buying behaviors of our consumer, our distribution should be modeled around our product offering. 10 years ago the airlines had 4 POS (Point of sales) which is ATO, CTO, TA (travel agents) and some airlines had call centers for reactive selling mostly for customer service. Distribution channels are overarching to our growth strategy and we consistently focus on exploring innovative and effecting distribution channels," he said.
Rathod shared that online travel agents account for around 25% share of overall LCC tickets in India and the web direct channel for LCCs has settled around similar percentage. Agents in India contribute maximum chunk of distribution for LCCs, too.
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pabhyankar said on 28 Mar 08:
I am not sure why do the LCC's have to sell their inventory through the GDS's? Their main target audience are the customers in India. How often do you see a foreigner taking a LCC flight? Plus for a fare of Rs.500, why do the LCC's want to pay a segment fee of close to $4 which can even go upto $9? I have been in this trade for a little over 16years and pretty well versed with the way the GDS's charge the airlines and squeeze them off their revenues...
I think the LCC's need to relook at their distribution strategy....the recent surge in air travel in India is good enough for the LCC to target a population of 1 billionplus, instead of distributing through the GDS's and add to misery of loosing more money.....the best way to reach out to the global audience is to set up multiple websites globally which would cater to people wishing to buy tickets on the airline....