Airlines resist lowering fares in lean season to land profits
Despite lower demand that has been predicted for the current quarter, industry insiders say that airlines can still post a slim profit as the fares are high, which will lower the break-even seat factor for the fourth quarter of fiscal 2012-13 also.
“The quarter is weak but, historically, airlines have achieved around 74-75% seat factors during the fourth quarter; so if the break-even is around 70-71%, it should be enough for airlines to post some kind of a profit,” said a senior executive at one of India’s largest low-fare carriers. “With no Kingfisher Airlines this year, naturally that traffic will shift over to the other airlines; so even with higher fares, it shouldn’t be too difficult for airlines to match last year’s seat factors.”
Last year, Jet Airways had an average seat factor of 77.1% during the January-March quarter, while SpiceJet had a seat factor of 73.1%. However, the two airlines managed to achieve such seat factors due to low fares, which resulted in heavy losses. SpiceJet made a net loss of Rs 249.18 crore during the fourth quarter of 2011-12, while Jet Airways made a net loss of Rs 298.12 crore.
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