Tuesday, September 04, 2018

IndiGo's festive sale shows everything that is wrong with Indian aviation

With fares starting at less than a Rs 1,000 for 10 lakh seats spread over the peak festive flying season and into the lean season, IndiGo’s sale announcement this (Monday) morning shows all that is wrong with Indian aviation. Other airlines are also offering similar fares and thus continuing the trend of red ink being splashed over airline balance sheets.

This link shows how fares start at Rs 999 for domestic sector across IndiGo, GoAir, AirAsia India and SpiceJet. India’s airlines have been adding capacity furiously and taking fares further south in a mad rush to fill up aircraft, mostly at the cost of yields or what they earn from each passenger.

This has already threatened the survival of some airlines while squeezing each and every one of profitability as costs continue to rise while revenues shrink. But instead of looking to raise fares, the airlines are again trying to sell seats below cost, thus harming any prospects of a recovery in yields.

Of course, the oft-repeated argument airlines put forward when defending frequent sales is this: Only a tiny percentage of total seats is put on sale and such actions merely stimulate the market, without harming overall revenue streams.
Besides, many times these sales are targeted at those sectors where capacity additions are being done, on routes where an airline did not have flights earlier. Sales help stimulate demand in these sectors while bypassing the busy routes.
03/09/18 Sindhu Bhattacharya/CNBC TV18