Indian full service airlines, buffeted by high fuel costs and intense competition, face new headwinds on their lucrative international routes as budget carriers launch services with rock-bottom fares.

Indian full service airlines, buffeted by high fuel costs and intense competition, face new headwinds on their lucrative international routes as budget carriers launch services with rock-bottom fares.

With low-cost carriers launching routes using narrow-body aircraft to overseas destinations within five hours flying time of India, full-service players are being forced to respond with similar no-frills offerings on popular and profitable routes.

Budget airline IndiGo, which in June firmed up a $16.2 billion order for 180 single-aisle Airbus aircraft, has received government approval to fly to Singapore, Bangkok, Dubai and Muscat, and is luring passengers with round-trip fares as low as 9,999 rupees ($220).

By comparison, full service carriers charge between 17,000 and 22,000 rupees for economy class Mumbai-Singapore routes booked a month in advance.

“The entry of IndiGo will help in growing the market. Low cost carriers are creating a new market with a new breed of customers who did not fly international earlier,” said Kapil Kaul, chief executive for the Indian subcontinent and Middle East at the Centre for Asia Pacific Aviation (CAPA).

Under Indian aviation laws, an airline needs to locally operate for five years before being assigned overseas routes.

Indian low-cost operator SpiceJet, with just six international flights now among its 200 daily flights, plans to expand its overseas network and has applied for several international routes, CEO Neil Mills said.

“Low cost carriers are much better poised to take advantage of the growth, because India is a very price-sensitive market,” Mills told Reuters.

Full-service carriers Jet and Air India already compete on regional international flights with foreign full-service rivals such as Emirates, Thai Airways, Singapore Airlines and Cathay Pacific. Low-cost carriers already flying international routes to India include Malaysia’s AirAsia as well as flydubai and Air Arabia, both based in the United Arab Emirates. Singapore Airlines also plans a low-cost carrier.

AirAsia, which in June announced a record aircraft order worth $18.2 billion, is expected to use much of its new fleet to link Southeast Asia to India and China. Asia is expected to account for more than half of global airline profits this year, according to the International Air Transport Association.

FULL SERVICE, LOW FARES

Jet Airways, India’s biggest carrier by market share, said it plans to introduce more low fare flights on shorter international routes to take on emerging rivals such as IndiGo and SpiceJet.

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