Air India, IndiGo may also cut fares to keep up with SpiceJet

Since Tuesday morning, SpiecJet, IndiGo are in a race to offer discounted tickets for advance purchases this quarter and Air India may also join the party soon.

January-March one of the leanest quarters for airlines in India so slashing advance purchase prices helps airlines get confirmed occupancy on flights. Besides, it also helps in generating cash which can then be ploughed back into working capital needs.

Early this morning, SpiceJet announced 50% off on all flights if tickets are being purchased for travel which is at least 30 days later. Sale ends midnight on January 23rd. The airline did not share how many seats were on offer under this scheme. But hours into the announcement, competitor IndiGo also began offering matching fares.

[caption id=“attachment_1334015” align=“alignright” width=“380”] Air India. PTI[/caption]

Industry sources said IndiGo had joined the fare war but there was not confirmation from the airline itself. These sources also said that Air India may follow and offer hugely discounted fares for travel between February 15 and March 31.

It is interesting to see that airlines, which have been suffering increasing costs and are in line for another disastrous quarter, have resorted to short term discounts once again. An industry veteran said these kind of sales do not really either generate any sizeable amounts of cash for the airline or ensure adequate loads. “We don’t know how many seats each airline will offer under such discounts. Besides, even under normal circumstances, 30-day advance purchase fares are close to half the price of spot fares so this is not so much a discount as it is a marketing gimmick”.

But Sharat Dhall, President of travel portal Yatra.com said this was an attempt by airlines to get early bookings for the summer season. “SpiceJet and Indigo slashing airfares for advance purchase across sectors is an attempt to garner early bookings for the coming summer season. The airlines are offering airfares as low as Rs 3,355 for the Delhi-Mumbai route where the spot fares are as high as Rs.10,098. With other airlines likely to follow suit, travellers are finally getting a respite from the high airfares and will take advantage of these great prices to book their holidays in advance.”

Speaking to CNBC-TV18, Sun Group’s CFO SL Narayanan said he expects no impact on margins of SpiceJet because of the discounts. He also clarified that the offer is valid only for domestic flights.

A company spokesperson told Firstpost, “This kind of off-season sale, limited time, highly fenced (this sale requires 30 day advance purchase), and capacity controlled to prevent dilution, is routine practice in the airline industry all over the world. These kinds of sales are just examples of tactical inventory management, and help airlines fill seats that would otherwise go empty. It is revenue-positive for the airlines.”

Losses at SpiceJet have been mounting, as the company grapples with high fuel price and fierce competition. The company has reported a net loss of Rs 508 crore for the first half of this financial year, on the back of a Rs 191-crore loss for 2012-13.

But for flyers, these sale announcements come as a boon.