In a recent article, we shared with our readers about upcoming changes to #AirIndia’s summer schedule 2022 with important updates about flights to and from its London Heathrow hub. This included scaling up some of links to critical stations Amritsar, Ahmedabad, Hyderabad while axing some of the routes (Chennai, Bangalore, Kolkata) amidst all other changes.
We missed to touch about important destination Birmingham (BHX) in the last article, the second route to the UK and the only airport Air India currently serves in the United Kingdom apart from London.
As of now, Air India has 1 flight per week every Friday from Birmingham to Amritsar, and this is the only route that AI serves out of Birmingham. Given the change in circumstances, it was predicted that the frequency of this route would be scaled up in every likelihood.
However, on the contrary, and to everyone’s surprise Air India (as per the current booking portal) will continue to fly 1 weekly flight on this sector.
In this article will try to explain why we think this is one of the goldmine sectors for Air India’s Long Haul operations and why should Air India route planners seriously consider increasing capacity on this sector.
- High Yield Sector
Yield is a critical term in the Aviation Industry. It is a measure of the profitability for operations of any flight.
Yield= (Average Fare per flight)*(Avg Number of passengers per flight) for the starters.
To understand this more, let’s see the average fares across various sectors on Air India’s UK network to know this better. (Notable to mention here is that this average is calculated upon the forward booking fares showing up in the second fortnight of February, and while the absolute average values of fare might not be the same, but the trend would be, in every likelihood)
Very clearly as one can see, the Amritsar-Birmingham Sector rates are very different among the rest of the sectors, with the highest Average Economy fares (around 118.3K INR) across the network and by a significant margin, only to be followed by Amritsar-London Heathrow, the second highest at 84.1K INR, closely followed by Ahmedabad.
Even for the Business Class, Amritsar-Birmingham sector is the runner up with second-highest Average Fares at 177.7K, only second to Ahmedabad-London Heathrow.
Not to much surprise, a similar trend is seen in the return leg, where Birmingham-Amritsar is again the market leader with 126.6 Thousand, i.e., 1.26 Lakh Average Economy Class Fares and 3rd highest Avg fares in Business Class, only second to Amritsar-London Heathrow & Ahmedabad-London Heathrow.
When we talk about the Economics of the Aviation Industry, the profitability of a flight always balances the equation of Cost & Revenue.
As we already discussed revenue (by Average Fares), let’s dig down to the costs.
- Fuel Burn: The ATF Fuel is inarguably the most dominant component of the entire costs of the airlines in the Aviation Industry. It is no brainer that Fuel Burn is proportional to the aircraft’s flying time.
It is notable to mention that Amritsar(ATQ) is the closest point between India & the UK due to its strategic geographical position. Hence, Fuel Burn (and consequently overall costs) of AI flying between Amritsar & Birmingham are significantly less compared to most of the other sectors in the network, where the airline has to fly anytime between 30-45 minutes to 3 hours more in the air, and thus, higher fuel burn.
2. Other Costs: When we compare Amritsar<>Birmingham with other sectors across the UK network, It won’t come as a surprise that the significant cost factor worthwhile a mention, only second to the ATF Fuel Burn has to be slot issues and slot costs at World’s Most slot constrained Airport (LHR).
Now, Amritsar<>Birmingham is a sector between secondary airports of both countries, and in turn, slot costs would be even less than the costly cutthroat slots at London Heathrow.
The difference between RASK and CASK determines the overall success of a sector in aviation. For starters, you can consider the difference between Total Revenue earned by the airline on the sector and Total Cost incurred by the airline on that sector determines whether that sector is profit or loss-making and by what margin.
In our analysis, we say both sides of the equations, Revenue and Costs, and it is clear this sector is shining on both sides, high revenue and low costs, which equates to great profitability. An airline would not opt to redeem such an opportunity only in rarity. This is where Air India’s decision of not scaling up frequency on this sector comes as a great surprise! What do you make out of this absurd decision?
ABOUT THE AUTHOR
*Sanchit Chugh is a young Aviation enthusiast from Amritsar, Punjab. He is currently an undergrad student at BITS Pilani pursuing Bachelor’s of Technology and Masters in Economics. He is part of core team at FlyAmritsar Initiative and has avid interest in Aviation.