AirAsia's 'zero rupee' offer: Why IndiGo, SpiceJet need to strategize now

The Malaysian carrier, which is launching an airline in India in partnership with the Tatas, today announced 'zero rupee' fares to Indian cities on international routes within Asia.

Sindhu Bhattacharya April 02, 2013 09:47:33 IST
AirAsia's 'zero rupee' offer: Why IndiGo, SpiceJet need to strategize now

New Delhi: SpiceJet and IndiGo better sit up and take notice, for this offer is surely an indicator of things to come from AirAsia in the not-so-distant future. The Malaysian carrier, which is launching an airline in India in partnership with the Tatas, today announced 'zero rupee' fares to Indian cities on international routes within Asia.

This means passengers will have to pay only airport charges and fuel surcharge only, the airline is offering seats for free. Tickets can be booked till April 7, but the journey can happen only in 2014, from January one to April 30th. So anyone who wants to book almost one year in advance can avail of these rock bottom fares.

AirAsias zero rupee offer Why IndiGo SpiceJet need to strategize now

These low fares can get Indians to Singapore, Phnom Penh, Jakarta and Kuala Lumpur. Reuters

These low fares can get Indians to Singapore, Phnom Penh, Jakarta and Kuala Lumpur. The offer enables flying from Kolkata to Bangkok for Rs 3,300, Chennai to Bangkok for Rs 3,500, Bangalore to Kuala Lumpur for Rs 5,500 , Kolkata to Kuala Lumpur for Rs 5000 , Cochin or Chennai to Kuala Lumpur for Rs 4500 and from Tiruchirapalli to Kuala Lumpur for Rs 4000. All these fares are inclusive of taxes.

A statement from AirAsia said that up to two million seats are on offer under this scheme. It also includes such fares to domestic Malaysian destinations such as Penang, Johor Bahru and Terengganu.

So why should IndiGo and SpiceJet worry? They need to strategize since "zero rupee" fares are a thing of the past in India - the last time zero or one rupee fares were announced was when Captain Gopinath still ran Air Deccan. A lot of Indians learnt to fly on these ridiculously low fares but Air Deccan had to look for a buyer since its own finances were smeared in red.

Pricing discipline was the key till last year for all airlines, when yields (revenue per passenger) went up for most of them on higher ticket prices. But in the last few months, when less and less fliers are taking to the skies, airlines have once again resorted to fire sales of tickets to fill up their aircraft.

Not only will arrival of AirAsia spell doom for low cost carriers (LCCs) which account for more than three fourths of the domestic market now, it may require them to tweak strategy substantially. AirAsia's offer is easy on the pocket but has several hidden charges: this airlines charges people extra for check-in baggage, it charges them for food and perhaps would want to also charge for seat preferences etc when Indian operations begin.

So our LCCs have a difficult choice: begin offering zero rupee fares for 12 month-advance purchase or risk losing some customers to the aggressive Malaysian neighbour

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