Home > companies > news > SpiceJet sparks another fare war as airlines face lean season

India’s second largest low-fare airline SpiceJet Ltd’s latest fare cut seems to have sparked off a season of passenger bonanza with most domestic airlines, including Jet Airways (India) Ltd and GoAir, joining the race on Tuesday with discounts of their own.

Jet Airways, the second largest airline by passengers carried, joined the fare war and is offering hefty discounts for three days starting Tuesday and ending on 27 February. In a circular to travel agents, reviewed by Mint, Jet Airways said the travel validity is between 27 March and 30 September.

The discount offers of other airlines are ending on 26 February and travel validity is between 1 April and 30 June.

GoAir, the low-fare airline run by Go Airlines (India) Ltd, is offering 70% discounts for booking up to 26 February. The airline announced on its microblogging site, “Summer vacation travel offer. Fares starting as low as 1,726." The discounted fares are excluding taxes.

According to travel agents, Air India is matching the fares of low-fare airlines in select sectors.

SpiceJet on Monday cut fares by 75% for bookings made during 24-26 February to fill seats during the lean season. This is the third sale in about a month offered by domestic airlines.

According to the SpiceJet website, a typical Mumbai-Delhi fare would be as low 3,186 after discount compared with the last-minute booking price of 10,098, while Delhi-Goa would be 3,737 against 11,148.

“Super Summer Sale is valid on all domestic direct flights on the SpiceJet network. SpiceJet will offer discount on base fare and fuel surcharge only. All applicable fees and taxes to be paid by the customer," the website said.

IndiGo, India’s largest airline by passengers carried, joined the fare war on Monday itself with flights starting at 1,867. The airline, which is operated by InterGlobe Aviation Ltd, announced rates for select sectors including Mumbai-Delhi ( 3,410), Mumbai-Goa ( 2,078), Bangalore-Hyderabad ( 1,943) and Ahmedabad-Mumbai ( 1,867).

The airline, in a late night circular on Monday, said the travel is valid between 1 April and 30 June and for bookings during 24-26 February.

Neelu Singh, chief operating officer at Ezeego One Travels and Tours Ltd, which runs online travel agency firm www.ezeego1.com, said these discounts will bring down travel costs by at least 30%.

“However, the inventory on metro routes are very limited and it is aimed at tourist and non-metro destinations which will see a surge in bookings from people eager to book their summer vacations. The earlier the booking better is the discount as these fares are for a limited inventory," she added.

“This is a bonanza for holiday makers and a great opportunity to get super discounted fares for the family holiday this summer," said Sharat Dhall, president at Yatra Online Pvt. Ltd, that runs Yatra.com.

“We are already seeing bookings triple from normal levels within hours of the sale being announced," Dhall added.

The promotional fare plan comes at a time when SpiceJet is looking for investment to fund its expansion plan. Last week, consultancy firm Centre for Asia-Pacific Aviation, or Capa, said in a report that SpiceJet is estimated to need close to $200 million to remain operationally viable, while a realistic and meaningful turnaround may require $300 million or more.

Chennai-headquartered SpiceJet recently appointed consulting firm Bain and Co. to restructure its network and return to profitability after losses mounted over the past few quarters.

As of 31 March 2013, the total accumulated losses of the aviation industry over the previous seven years had risen to $8.6 billion (based on current exchange rates), consultancy firm Capa said in its last week report, adding the industry debt had climbed to $12.6 billion, with the full-service carriers—Air India Ltd, Jet Airways and Kingfisher Airlines Ltd—accounting for 94% of the amount.

SpiceJet, controlled by media baron Kalanithi Maran, posted a net loss of 173 crore in the three months to December, against a net profit of 103 crore in the year-ago quarter.

In January, SpiceJet had cut fares by more than half for bookings for three days, a move promptly followed by other airlines including Jet Airways and Air India.

“We received overwhelming positive feedback from customers who booked the earlier ‘Super Sales’ for taking the lead in making air travel more affordable, where travellers can now book more spontaneously and more often by air, and also for attracting many first time air travellers who would otherwise endure long train journeys or not travel at all," said Sanjiv Kapoor, chief operating officer, SpiceJet.

Kapoor said these advance purchase offers are a win-win for customers, for airlines, and for the travel industry and the economy overall, as it leads to significant demand stimulation, even as customers get to enjoy deeply discounted fares, airlines get to reduce wastage of seats that would otherwise fly empty, and others in the travel ecosystem get more business.

“These are not fare wars as is commonly reported, as there are no losers. This is just basic customer segmentation and inventory and revenue management," he added.

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