War over airfares intensifies, Air India joins in

New Delhi: What began as an offer of 10 lakh cheap air tickets from SpiceJet in January has escalated into an all-out price war, after Jet Airways announced what it pegged as its 'biggest air ticket sale' yesterday, offering 20 lakh seats on over 450 domestic flights daily at rail-ticket rates. By evening on Tuesday, budget carriers GoAir and Indigo had followed suit with unannounced, discreet price cuts offered through travel and ticketing websites such as Makemytrip.com. National carrier Air India jumped into the low-cost ticket rush on Wednesday evening, launching special fares working out to a discount of up to 40  per cent on the one-way regular fares charged by it on domestic flights. On the Delhi-Mumbai route, an economy class one-way ticket for mid-April has been priced at Rs 3,201 by Air India, Rs 3,340 by Indigo, Rs 3,350 by Jet Airways and Rs 4,426 by SpiceJet. A Delhi-Chennai ticket will cost Rs 3,701 on Air India, Rs 3,840 on Indigo, Rs 3,850 on Jet Airways, Rs 4,008 on Jet Konnect and Rs 4,714 on SpiceJet. In the lean season (January-March), this is expected to fill up many seats that would have otherwise flown empty, and could bring some respite for an industry deeply mired in the red. Civil Aviation Minister Ajit Singh said today that his ministry did not want to interfere with airfare pricing. "Airlines have to look at profitability, we cannot do anything... if they think this is profitable, they are free to do it." But the minister did say that the Civil Aviation Ministry would consider a monitoring committee to set, in consultation with the airlines, a ceiling and a floor for airfares. Vikram Malhi, country head of travel portal Expedia, said the drop in fares will help airlines fill up their seats and increase their load factors. Global consulting firm KPMG said Jet's offer will help stimulate the market, shift passengers from trains, encourage non-flyers to fly and expand India's "abysmally low flyer-base." "Last year, Jet flew around 16 million domestic passengers with a load factor in the low 70s, which implies that the total seats on offer were around 21 million.  The ongoing Jet offer is a limited period campaign with around 2 million seats on offer.  That translates to around 10 per cent of Jet's total capacity.  So Jet is only monetising the seats that would have anyways gone abegging," Amber Dubey, partner and head-aviation at KPMG, said in a note yesterday. "It may not cannibalize too many corporate passengers who fly at short notice and hence buy at spot fares. After the KFA (Kingfisher Airlines) episode, airlines would be careful about not pricing tickets below cost for a sustained period.  Their lenders and DGCA (the Directorate General of Civil Aviation) are watching too," he added. Analysts expect Jet to mop up sales of Rs 600 crore through this scheme. Under Jet's offer announced yesterday, a single economy class journey on the full-service airline could cost as little as Rs. 2,250 all paid. The one-way fare from Mumbai to Delhi is down to Rs. 3,300 staring today, while a one-way ticket from Delhi to Chennai can be snapped up at Rs. 3,800. A non-sale Jet Airways ticket to Chennai for, say, Sunday, March 3, costs more than Rs 9,000 if booked today. Those who want to avail the Jet offer must book in the next five days, but can travel any time up to December-end this year on Jet Airways and JetKonnect, the airline said. Travel sites have rushed out e-mailers and sms alerts announcing the big sale. Low-cost Chennai-based carrier Spicejet began the trend in early January, putting 10 lakh seats on sale for Rs. 2,103 apiece for anywhere in the country. The offer had generated a massive response from passengers. The Spicejet offer is valid for travel from February 1 to April 30, but tickets had to be booked by January 13. Chief executive Neil Mills said SpiceJet sold 7,05,000 tickets in three days; the airline netted a huge Rs. 165 crore, according to a PTI report. The Indian aviation sector is going through a tumultuous time, thanks to rising jet fuel prices and the global economic uncertainty, coupled with intense competition. Liquor baron Vijay Mallya's Kingfisher Airlines has been the biggest victim. Kingfisher, which has a debt of nearly Rs. 8,000 crore and accumulated losses and liabilities of a similar amount, has been grounded since October 1 after its pilots and engineers went on strike. High airfares throughout last year, caused primarily by the grounding of Kingfisher Airlines, had led a substantial chunk of passengers opting out of air travel. This led to negative growth in traffic for the first time since 2009. The struggling sector saw a mild recovery in the third quarter with SpiceJet flying back into the black in the December quarter with a profit of Rs. 102 crore compared to a net loss of Rs. 39.3 crore in the corresponding period of the previous year, on the back of higher revenue and stable oil prices. Higher yields, cost and network initiatives helped the Jet Airways group post a profit after tax of Rs 93.1 crore in the third quarter versus a loss of Rs 122.8 crore in the year-ago period. In a statement poste on its website, Jet Airways cautioned that jet fuel prices as well as the rupee's depreciation against the dollar continue to be a cause of concern in the short term. Debt-ridden and with no customers, Kingfisher Airlines posted a Rs 755 crore loss in the three months to December 31 as its planes sat idle. Source: NDTV