Airlines take to free tickets, discounts to boost revenue

Written by Shaheen Mansuri | Mumbai, Feb 27 | Updated: Feb 28 2008, 05:50am hrs
In the aviation sector, where profit margins are wafer-thin, airline operators are taking a lead in introducing free tickets and other freebies to improve air travel bookings. The rationale behind introducing free ticket is to cut down losses. In the fiscal 2007-08, airlines collectively incurred losses to the tune of over Rs 2,000 crore.

Explains Anand Ramachandran, vice-president, finance, Deccan, "We resort to schemes like free tickets and discounts to sell unsold tickets across sectors, especially during the lean season. For instance, our passenger load factors (PLF) were 79% in January, and the remaining seats were sold by offering free tickets exclusive of taxes. Air tickets are perishable commodity. Once the doors of the aircraft are shut for take-off, the vacant seats cannot fetch any returns and selling them off at a discount makes business sense."

By offering tickets at throw away prices, the airlines not the least earn minimal revenues by way of fuel surcharge and other taxes which is approximately Rs 2,050 on each ticket inapplicable of whether sold in an offer or across the counter. The schemes help the airlines get over 200 bookings during the first week after the announcement of the schemes.

Currenlty, many carriers have ongoing schemes, which include low cost carrier GoAir's 'Valentine Free' offer wherein a passenger, on booking one ticket, gets one ticket free for travel between February 15 and June 30. Similarly, Deccan has a 'Fantastic February' offer where travellers are entitled to a free flight voucher, which can be redeemed against subsequent bookings for travel till March 31.

An official from the Delhi-based SpiceJet adds that free fare schemes help generate more air traffic. "We introduce such schemes after bearing in mind the economics of our operations. We also introduce many schemes depending on the availability of seats in the lean season," said the official adding that the schemes are always responsive to the market.