Billionaire investor Rakesh Jhunjhunwala's Airline Akasa will operate as a ULCC: What's ULCC?

Investor Rakesh Jhunjhunwala has said he will launch an airline that will have up to 70 planes within four years.

Stock market investor Rakesh Jhunjhunwala has said he will launch an airline that will have up to 70 planes within four years. The billionaire is considering investing $35 million and would own 40 percent of the airline. He will rope in Aditya Ghosh, the former president of India' largest airline IndiGo as a co-founder.

The airline has been christened as Akasa and will operate as an ultra low-cost carrier (ULCC). IndiGo and SpiceJet operate as low-cost carriers (LCCs) in india.

Air Deccan began the Low Cost Carrier (LCC) revolution in India. Eighteen years down the line, over 80 percent of the market share is with LCCs in India, probably the highest anywhere in the world. This comes on the back of two major failures — Kingfisher Airlines and Jet Airways and lack of growth from Air India.

What is an LCC model?

A typical LCC model involves a single type of fleet, limited personnel costs, focus on ancillary expenditure, point to point network, single class of service, direct channel bookings amongst others. This also includes flying to secondary airports and avoiding the high-cost primary airports.

What about ULCC?

Cut to ULCC. Airlines that follow an ultra-low-cost model will cut back on all expendable costs. A ULCC will stuff as many seats as possible onto planes, fly more hours a day and keep seat prices separate from all related goods and services.

Every space is worth selling, if not for passengers then for advertising. Advertising on the luggage bins, foldable seat back trays, paper cups, food packaging and just about everything. And a separate charge for every unbundled service, such as each bag and each seat.

The bottom line

When you look at the various options in the market and it is amply clear that GoAir and most other LCCs are already doing what an LCC or ULCC can, focusing on ancillary revenue for seats, food and beverages (except water), limited baggage allowances which mean passengers have to buy additional baggage allowance in advance or pay at the airport.

The ULCC model is not for everyone. As one would expect, the ULCC space can become cutthroat like the rest of aviation. It does not take much for an LCC to become a ULCC. Indian airlines have long focussed on luring travellers from a rival and boosting market share even at the cost of losing money on routes.