A shift in traveller preference towards low-fare carriers will play a crucial role in defining the focus of Indian airlines in the months ahead, said analysts. Even full-service private carriers such as Kingfisher Airlines, reeling under high fuel costs and mounting losses, may rely on its low-cost operations to tide over the challenging cost environment.

The Vijay Mallya-promoted carrier is reportedly planning to hive off its low-cost service Kingfisher Red into a separate entity. Kingfisher has a market share of above 19% and is the second largest airlines in the Indian skies. Though low-cost carriers give lesser revenue per km paid passenger, it helps airlines cut operational costs.

In the June quarter, Kingfisher Airlines' net loss widened to 263 crore rupees from 187 crore rupees a year ago primarily due to high fuel cost and a swing in market share towards low-cost travel. Its earnings before interest depreciation tax amortisation and rentals (EBIDTAR), which is a measure of operational performance of an airlines, declined to 13% from 20.5% in the previous year. However, load factor stood at 85%, better than the industry average of 78%.

Low-cost carrier SpiceJet, on the other hand, has a distinct advantage of catering to price-sensitive travellers. An asset-light model, where the entire fleet is leased, helps the company conserve cash and keep control debt, said analysts. Also, the company has single-type aircraft, which helps it maintain its aircraft efficiently.

Though rising fuel cost turned the company into losses in the first quarter, the airlines has gained nearly 2.2% in market share, which now stands at 13%.

In the coming quarters, SpiceJet plans to add 15 Q400 NextGen turboprop aircraft to its present fleet size of 26 aircraft. These aircraft are used for short haul and have a load factor of more than 75% and will help the carrier to penetrate in tier-II cities.