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All airlines in India have been slashing their fares since January. The sheer numbers of special offers, and schemes coming across my desk have overwhelmed me.
However, these appear to be coming to an end.
Despite a drastic cut in fares of nearly 50 per cent for full service airlines and over 40 per cent on low cost carriers the demand is still not picking up sufficiently to offset the reductions. At some of the current special fares levels, passenger load factors would have be greater than 100 per cent, which is simply not sustainable. Add to this, that March onwards the traffic naturally starts picking up.
Airlines have started complaining to the government about the “unrealistic fares”.
So if you are planning to buy some tickets, do it right away.
SpiceJet CEO, Sanjay Aggarwal’s interview with CNBC-TV18, gives us some clues on how airlines think.
Q: At a time when the industry is reeling under huge losses, should fares be a lot more disciplined in terms of getting into this aggressive price war?
A: The question is what they should be and what they are? Right now it is a competitive environment and there are competitive pressures. Even though we would like to keep fares higher, we have to stay in line with what the other carriers are doing and right now the fares are low and I think these are unsustainable fares. Some of the viewers who are looking at buying air tickets; they should do it sooner than later. In the near future I see fares going up.
Q: Have you seen any sort of a volume pick up post your decision to slash fares and has that at all offset the kind of losses that you’ve been sitting on?
A: First of all – have we seen pick up in demand? The answer is yes we have but not sufficient to offset the revenue loss. So for example the fares have come down 40-50% however the load factors have not gone up and the current fares, it will take us more than 100% load factors to break-even. So when I talk about these fears being unsustainable, it is not just we need to get 5-10% more load factors, it is just unrealistic. The second piece being, should we be more disciplined? Of course we should be. So we will see where the market goes but as I said my guess is the next few weeks, the fares should begin to move up.
