Sunday, February 09, 2014

Aviation's Less-for-More Model

Keeping in view the lean season coming up (March-April), airlines such as SpiceJet, IndiGo, Air India and Jet Airways have unleashed a fare war offering discounts as high as 65 per cent on select flights. These tickets are to be booked 30 days in advance and are expected to increase occupancy for airlines. However, experts say such a move could impact their profits.
Typically, 85 per cent of the total fare on busy routes like Delhi-Mumbai and Mumbai-Bangalore is constituted of the base fare, fuel surcharge and common use terminal charge or user development fee (UDF). While the fuel surcharge, UDF and terminal charge are standard charges, the base fare varies from day to day. If you book a flight a month or two in advance, the base fare can be as low as `800 for a Delhi-Mumbai flight; a week before departure, it could be as high as Rs 19,000.
During the sale period, the airlines put the base fare at a minimum and hence were able to sell tickets at a relatively lower cost. For instance, SpiceJet offered fares as low as `3,579 for the Mumbai-Delhi route, while the spot fares are Rs 10,098. Similarly, Air India, during its discount sale last month, offered fares as low as Rs 1,385 on the Kolkata-Agartala route.
09/02/14 Sunitha Natti/New Indian Express
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