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Indian middle class prepares to take to the skies

July 27, 2005

Arriving by rickety bicycle, the postman delivers a letter to a man in his remote village. The letter is from the man's son, who has established himself in the big city.

Up until this point, a viewer would be forgiven for thinking he was watching a scene from one of the great Indian director Satyajit Ray's cinematic explorations of rural life.

But no film this - the television commercial, which debuted this week, depicts the father opening the letter which contains an airline ticket to visit him on Air Deccan, India's first low-cost air carrier.

India is on the brink of a new era of travel with 10 new discount airlines planning to enter the market over the next 18 months. They are all banking on heavy volume from first-time passengers like the father in the commercial.

For years, prohibitively expensive domestic air travel in India was the preserve of the wealthy or the business traveller, while the large middle-class stuck to the railways, which, built by the British under the colonial regime, reached far into the hinterland.

In a country where running water and electricity routinely fail, the government-run train network is efficient and well-regarded by comparison.

Soon, however, Indians will abandon their much-loved railways for the skies, lured by dirt-cheap air fares. Filling the aisles will no longer be just the well-heeled businessman's wife or a leading company executive, but students, middle-class families going on holiday, and middle managers.

Some 40 per cent of travellers on the budget airlines are estimated to be flying for the first time.

Rita Kakkar, an English professor at Delhi University, is planning to fly to Kolkata with her daughter to shop for gold ahead of her wedding. They were able to snag air tickets from Delhi to Kolkata for Rs500 ($11.50) each in a routine promotional offer by Air Deccan.

At Air Deccan's ticket counter at Palam National Airport in Delhi, Ms Kakkar said if she had not found cheap air fares she would have taken a 24-hour train journey that would have cost her at least four times as much. "We come from the middle class. Why throw money away?" she says.

Not all Air Deccan's air fares are as cheap as the one Ms Kakkar found, but they are still on average 50 per cent lower than those offered by India's established domestic airlines - Jet Airways, Indian Airlines and Air Sahara.

An average Air Deccan ticket from Delhi to Kolkata would cost about Rs3,000, slightly more than the Rs2,250 fare for a place in a second-class air-conditioned train carriage, but far less than the Rs10,000 charged by the other three air carriers.

"There's a whole lot of new travellers coming in," says Nures Sayeed, vice-president of brand communications for Spice Jet, which two months ago became the third Indian budget airline to spread its wings, on the heels of Kingfisher Airlines. "Our whole focus was this new traveller."

Mr Sayeed says Spice Jet is aimed at the time-conscious middle-class Indian who can no longer afford to spend two to three days of a 10-day holiday on the train from Delhi to Bangalore. He says low air fares have also encouraged small and medium-sized companies to send their executives on business trips they otherwise would not have made.

"We have multiple catchment points," he says, adding that the company's average seat occupancy has been 93 per cent since its launch.

If Air Deccan's success is anything to go by, Spice Jet's optimism is not misplaced.

Air Deccan's founder, G R Gopinath, who as a former captain in the Indian army goes by the name of Captain Gopi, started thinking about low-cost air travel in India after having an epiphany in Phoenix airport in the US three years ago.

"This tiny airport in the desert, in the back of beyond, was handling 1,200 flights a day, twice the number of flights in all of India," Captain Gopi says.

Venture capitalists turned down his proposal to launch a discount carrier, deterred by the government's heavy regulation of the aviation industry. Air Deccan started 19 months ago with one flight from Bangalore to a city called Hubli in the southern state of Karnataka. He now has 19 aircraft flying to 34 cities, amounting to 115 flights a day.

Captain Gopi estimates Air Deccan will fly 4m passengers this financial year and 8m next year, up from 1m last year. He projects his airline will earn a $15m profit on revenues of $250m this financial year.

"India cannot have equitable and sustainable growth if the middle class cannot fly," he said.

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