Airlines take to free tickets, discounts to boost revenue

Mumbai: In the aviation sector, where profit margins are wafer-thin, airline operators are taking a lead in introducing free tickets and other freebies to improve air travel bookings. The rationale behind introducing free ticket is to cut down losses. In the fiscal 2007-08, airlines collectively incurred losses to the tune of over Rs 2,000 crore.
Explains Anand Ramachandran, vice-president, finance, Deccan, "We resort to schemes like free tickets and discounts to sell unsold tickets across sectors, especially during the lean season. For instance, our passenger load factors (PLF) were 79% in January, and the remaining seats were sold by offering free tickets exclusive of taxes. Air tickets are perishable commodity. Once the doors of the aircraft are shut for take-off, the vacant seats cannot fetch any returns and selling them off at a discount makes business sense."
By offering tickets at throw away prices, the airlines not the least earn minimal revenues by way of fuel surcharge and other taxes which is approximately Rs 2,050 on each ticket inapplicable of whether sold in an offer or across the counter. The schemes help the airlines get over 200 bookings during the first week after the announcement of the schemes.
28/02/08 Shaheen Mansuri/Financial Express

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Categories: Indian Aviation- In General Feb 2008