The truth about airline discounts
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Last week, AirAsia India and GoAir became the latest domestic airlines to offer discounted tickets for the coming lean season, following SpiceJet, which launched four such offers in July and August. An analysis of such discount sales, where the number of tickets on offer was mentioned by the airline, shows that for all the visibility they generate, most of the time, the pool of tickets on offer is small. From a passenger’s perspective, it turns the proposition into a luck of the draw. From the airline’s perspective, in most cases, it’s about positioning itself as a price player without conceding too much from its profits.
Slim pickings for passengers
In seven out of 10 offers, the number of discounted seats on offer was less than 10% of the total seats the airline sold during the same period; four were under 5%. There was one offer in which SpiceJet put up about one-third of its ticket block on discount. That same year, SpiceJet posted its largest-ever loss of Rs.1,003 crore and, six months later, its existence was in question. Even after revival, SpiceJet remains the most active on the discounting front, though with a significantly lower percentage of seats.
Slim giveaways from airlines
The airline discount strategy is to stoke interest of flyers. In most cases, the travel period is long, thus catching the potential interest of a large percentage of the airline’s passengers. But since the number of discounted seats is a fraction, the net effect of discount offers on profits, in most cases, is marginal.
Graphics by Ahmed Raza Khan/Mint.
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