Thursday, July 05, 2018

A race to the bottom

Airlines in India, it seems, are in a race to the bottom. Over the last week, several airlines have come up with discounted fare offers. Market leader IndiGo Airlines is selling tickets for as low as ₹999 on some domestic routes. So are SpiceJet and GoAir. AirAsia India is offering fares of ₹1,299 on some domestic routes and cheap fares on international routes too. Expect others to join the bandwagon soon.

Sure, such offers are typical in the September quarter, traditionally a weak one for airlines in India. It could be argued that airlines are seeking to woo passengers and fill up seats that would otherwise have flown empty.

But cheap fares are also reflective of the dog-eat-dog competition in the country’s aviation sector that has translated into a sharp loss of pricing power. Ideally, airlines, rather than cutting fares, should have upped them to pass on steep cost increases. Their major cost component — aviation turbine fuel — has been steadily increasing, due to the double whammy of rising crude oil prices and a weakening rupee.
05/07/18 Anand Kalyanaraman/Business Line