An aggressive Air India is leaving nothing to chance in the race to corner more market share and load factors while keeping yields intact.
Not only has the airline begun to aggressively promote the 30-day advance purchase scheme it unleashed four days back, it has also shrewdly decided to offer only a limited number of these discounted seats in the market besides levying a very hefty cancellation charge.
So if you were to book a seat on AI’s domestic network for, say, end October now, you would be able to get anywhere up to 40% discount on fares compared to a booking for, say, tomorrow or Saturday. But the catch is this: this ticket would attract a very high cancellation charge which would be higher than the fare difference between 14-day and 30-day advance purchase. Also, only a very small number of such seats are being made available on each flight.
Air India has improved both, its market share and on-time performance remarkably in the last two months so competitors need to watch AI closely now. Reuters
A senior Air India official explained to Firstpost that widespread apprehension of such fare schemes affecting airline yields were misplaced. “Yields will remain intact because we are controlling how much inventory will be released for such discounted fares. At any time, only 10% of our seat inventory will be made available on discounted rates”.
Since AI offers anywhere between 30,000-35,000 seats a day on the domestic network, this means only about 3000-3500 seats would be on discounted fares across the entire network. This official also said that very soon, all tickets sold under the 30-day advance purchase scheme would be made non-refundable.
He said the ‘jaldi jaldi’ scheme is targeted at leisure travellers and in the last four days – since this scheme was announced – the airline has seen a significant uptick in leisure traveller bookings. In fact, a separate booking class has been created for discounted fares to keep count of how many seats are offered at such rates and to ensure that yields are also tracked very closely.
A story in the Economic Times yesterday says that under ‘Jaldi-Jaldi’, tickets booked 30 days in advance on Mumbai-Goa sector would cost Rs 2,970, Mumbai-Delhi Rs 4,931, Delhi-Srinagar Rs 3,516, Kolkata-Delhi Rs 4,818 and Chennai-Port Blair Rs 4,378, inclusive of taxes. The story also talks of how competitors have already begun to follow AI’s lead. So IndiGo is offering return fares of Rs 9,591 on Delhi-Mumbai, Rs 10,202 for Delhi-Bangalore, Rs 9,954 for Delhi-Hyderabad, Rs 9,425 for Delhi-Kolkata, Rs 9,950 for Delhi-Chennai. Fares on these routes have been otherwise ranging anywhere between Rs 6,500 and Rs 9,000.
But will these discounts lead to AI wrenching any market share from equally aggressive competitors? This is unlikely because most of the competitors have also begun offering discounted fares almost immediately and also because market share has to be a function of capacity share and this factor in unlikely to change in a hurry.
The official quoted earlier said that Air India is going ahead with plans to add capacity without adding new aircraft by reconfiguring the aircraft which are already available. This would eventually increase capacity by about 5% by the end of this fiscal or about 1700-1750 seats on the domestic network. Already, 10 older aircraft of the Airbus 320 family have been reconfigured to all-Economy classification and four more would be reconfigured by December. These single-class aircraft would be deployed on North Eastern routes and short haul hopping flights.
Then, 25 others of the same Airbus family would be reconfigured to reduce the number of Business Class seats by March next year and this exercise is what would unleash additional capacity for AI.
The AI official pointed out that competitors are also adding capacity according to plans to it is imperative that AI also does the same. He said IndiGo continues to add capacity at the rate of one new aircraft a month whereas Jet Airways is also adding capacity by reconfiguring existing aircraft where it is either removing Business Class seats completely or reducing their number on select routes.
Already, Air India has improved both, its market share and on-time performance remarkably in the last two months so competitors need to watch AI closely now. Gone are the days of a complacent national airline letting aggressive new comers rake in the moolah.
