Airlines resist lowering fares in lean season to land profits
The domestic aviation industry has broken away from the tradition of lowering fares to overcome a lean demand season, which could help the industry post another quarter of profits.
Barring a three-day discount by SpiceJet, airlines have not slashed fares, which has helped maintain yields and bodes well for airlines, say industry officials and experts.
“We are heading into a weaker quarter but the yields have remained strong,” said Sudheer Raghavan, chief operating officer, Jet Airways. “From the forward bookings that we have seen, there isn’t too much of a concern.”
A round-trip fare booked a month in advance for the popular Delhi-Mumbai route can be bought from anywhere between R8,500 and R10,000. The fares are an indication that airlines haven’t slashed fares, which threaten profitability, but attract passengers.
“We believe that the pricing discipline in the industry has significantly improved the profitability over the past nine months and should help the sector going ahead,” said Vikram Suryavanshi, aviation analyst with Mumbai-based brokerage Antique Stock Broking.
Analysts say even SpiceJet’s three-day discount has not harmed the pricing discipline of the market. “We don’t think that the market discipline has been harmed because the scheme only had a three-day booking window,” says Jasdeep Walia, an aviation analyst with Kotak Institutional Securities. “None of the other companies have followed SpiceJet with similar offers.”
Higher fares have brought down the break-even seat factor for airlines in the third quarter of fiscal 2012-13, propelling them towards
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