Airlines brace for demonetisation headwinds by advancing flash sales
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New Delhi: Airlines have brought forward fare discounts they usually offer in the last quarter of the financial year as they brace for potential headwinds from the scrapping of high-value currency notes.
Almost all airlines have announced sales this month although November is part of a quarter that’s considered peak time for air travel because of festivals and year end holidays.
AirAsia India unveiled all-inclusive fares from Rs899 for travel till 30 April 2017. SpiceJet said it was offering fares of Rs737 on short-haul sectors like Chennai-Coimbatore, Jammu- Srinagar-Jammu, and Chandigarh-Srinagar.
GoAir, IndiGo and Jet Airways followed suit with similar fares for travel on many sectors.
On Wednesday, Vistara, owned by Tata Sons Ltd and Singapore Airlines Ltd, offered Rs999 tickets, allowing passengers to fly in the “happy month of December and into 2017”. These tickets will be for travel from 5 December right up to 1 October 2017.
Typically, such sales are announced in January for travel in the quarter ending March, considered a lean time for the airline industry.
An analyst said these sales were a result of the dip in traffic airlines are seeing as a result of demonetization of Rs500 and Rs1,000 bank notes which has caused a cash crunch. A significant part of airline booking is done by travel agents, many of whom deal in cash.
“Airlines have reported a short-term drop in ticket sales post the demonetization announced by the government recently, and the (discounted) airfares could be an attempt to catalyse demand and bring travellers back to the market,” said Sharat Dhall, chief operating officer at online travel agency Yatra.com.
The impact could be harder from this week on, an analyst said. “I think the impact of demonetization will be visible from 24 November onwards when old notes will not be accepted,” said Kapil Kaul, South Asia CEO of aviation consulting firm CAPA.
An airline executive who did not want to be named said bookings had dropped 16% in the weeks after demonetization, and discretionary travel has almost stopped.
“These are signs of nervousness. It never used to happen earlier,” said the executive, who did not wish to be named, referring to the flash sales.
This executive explained how when one airline starts a flash sale, rivals have no option but to follow. If they don’t, he said, it will reflect in lower occupancy for the month as also lower market share.
Most airlines have had no problems filling their seats this year. SpiceJet flew its flights 91.9% full in October, followed by IndiGo (84.9%), GoAir (84.4%), AirAsia (78.3%), Jet (75.5%), Air India (71.8%) and Vistara (69.2%).
Air traffic growth too has been strong. India’s domestic air traffic has been growing at a double-digit pace for at least two years now.
The rupee’s slump by 2.5% in November, the most in 15 months, to 68.47 per dollar is another emerging worry, the airline executive cited above said. Many airline costs like aircraft leases are dollar-denominated.
“I expect fuel prices to fall post 30 November, which will keep demand robust. At the current fare levels, I see no reason for any demand-related concerns,” Kaul said, adding “demand continues to be strong”.