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SpiceJet slashes base fare to Rs 1 IndiGo responds

Source : BUSINESS_STANDARD
Last Updated: Fri, Jan 11, 2013 19:30 hrs
India's SpiceJet aircraft prepares for takeoff at the airport in Mumbai

Low-cost carrier SpiceJet on Friday kicked off a price war in the lean season by slashing fares for one-way travel across the country to a consolidated Rs 2,013, including all taxes. The airline is offering one million one-way tickets, to be available only till Sunday, for travel to all domestic destinations it flies to between February 1 and April 31.

The move comes within days of Indian Railways announcing an increase in fares from January 21. With SpiceJet's airfare cut, on a route like New Delhi-Mumbai or New Delhi-Howrah, air travel would be less expensive than an AC-II or -I railway journey.

Responding to the steep cut, the country's largest low-cost airline, IndiGo, also reduced its fares, quietly, for select destinations. On these routes, which include key ones like Mumbai-Delhi, Mumbai-Bangalore, it is offering fares at Rs 2,000 for February. IndiGo refused to speak about its fare reduction and merely said: "IndiGo fares are in line with market requirement and the airline would continue to offer low fares consistently."

The SpiceJet fare is nearly 50-60 per cent lower than the normal average price. The airline offers a little over 50,000 seats a day. This implies the number of seats being sold at the heavily-discounted price accounts for 20 per cent of its three-month inventory.

Following the announcement on Friday, there was a scramble for tickets. According to the company, 200,000 tickets had already been sold by evening. There were rumours the airline's booking engine was unable to handle the sudden spurt in demand and crashed.

SpiceJet CEO Neil Mills clarified: "Our booking engine did not go down. But we limited the number of people who could log in simultaneously, due to sheer volume. This was to prevent the site from crashing. We sold 200,000 tickets on Friday, while normally we sell 40,000 to 45,000 tickets a day on an average."

Experts say SpiceJet has offered such a steep discount on fares to increase its passenger load factor (PLF) in the lean seasons between February and April. SpiceJet's PLF had stood at an average 75 per cent last year, compared to IndiGo's 80.43 per cent.

Travel portals, on the other hand, are very happy with the offer. "The discounted fares would prompt people to travel, even if they had not actually planned a trip. These are fantastic fares," says Sharat Dhall, chief operating officer, Yatra.com.

A spokesperson of MakeMyTrip, the country's largest online portal, says: "This is a period when airlines usually offer discount on tickets because February-March is a lean period for leisure travel by air. The last time airfares were slashed significantly was in November, when Air India had announced the Jaldee Jaldee' sale, though short-haul flights were cheaper then. SpiceJet's promotion has been of flat discounts across destinations and big savings for long-haul travellers, too."

Analysts say the move would help SpiceJet gain market share. Rashesh Shah, aviation sector analyst with ICICI Securities, says: "The move will enable SpiceJet to improve PLF and gain market share. Airline revenue drops in the fourth quarter on a sequential basis."


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