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Air India discounts spark price war

Source : BUSINESS_STANDARD
Last Updated: Fri, Mar 15, 2013 04:10 hrs
The Air India's Dreamliner Boeing 787 is given a traditional water cannon salute by the fire tenders upon its arrival at the airport in New Delhi

Air India Ltd's decision to offer discount on 60 days advance ticket booking has triggered a fare war, with rival Jet Airways (India) Ltd launching a similar scheme. Low-cost carrier IndiGo, too, has slashed fares to match Air India's levels, but has not announced any scheme.

Air India expects to increase its revenue by 10-15 percent and improve its loads by offering discount fares. On Wednesday, the airline introduced the discount fare to attract leisure travellers. Jet launched its scheme today.



Air India, Jet and IndiGo are offering one-way ticket on the Mumbai-Delhi route for around Rs 4,200, about 15-20 per cent lower than normal fares. However, the particular fare could not be found on Jet's site for travel in May.

According to people aware of the development, poor loads in the last peak summer season have prompted the government carrier to get aggressive in pricing. Air India's passenger loads last May and June were 66.5 per cent and 69.5 per cent, respectively, far lower than other airlines. During the same period, IndiGo's loads were 86 per cent, while Jet and SpiceJet had loads of around 75 per cent and 80 per cent, respectively.

A senior Air India executive confirmed that the scheme would help the airline increase its revenue by 10-15 per cent. "During the last summer, our loads were very poor. The scheme will help improve advance bookings. There is a market segment comprising train travellers which books tickets months in advance. We want to tap that segment," said the official, who did not want to be named. "This is not a limited period sale offer. A limited number of seats will be available on all flights and all routes."

Sharat Dhall, chief operating officer of Yatra.com, which sells air tickets online, said the discount fares would enable airlines to expand their market and grow passenger demand that had been sluggish since last year.

"The drop in fares would help the airlines in filling up their seats. On an average, Indian airlines have a load factor between 75-80 per cent, which reflects that at least 20 per cent of the capacity is left unused. Through these discounts, the airlines are aiming to fill up a certain amount of seats and bolster traffic on the weaker routes,'' said Vikram Malhi, country head of online portal Expedia.

In January, SpiceJet launched Re 1 base fare and offered 1 million seats at Rs 2,013 for travel between February and April. Jet had also introduced discount fares and offered 2 million seats for travel till December-end last year.

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