SpiceJet defends its move to offer discounted tickets

Written by fe Bureau | Mumbai | Updated: Mar 5 2014, 00:57am hrs
SpiceJetSpiceJet had on Feb 24 offered up to 75% off for travel between April 1-June 30, 2014. PTI
Low-cost carrier SpiceJet on Tuesday defended its move to offer discounted flight tickets during February which ultimately led to a fare war with other airlines soon following the suit by offering similar discounts under their advance booking schemes.

The promotions were targeted to achieve few key objectives Filling up seats that otherwise will be left empty, Stimulate new travelers and increasing the frequency of existing travelers, Limited to flights that have capacity that is expected to not fill under normal course, the airline said in a statement.

SpiceJet had on February 24 offered up to 75% off on base fare and fuel surcharge relative to last minute fares, for travel between April 1 and June 30, 2014, applicable for bookings made till February 26.

"These promotions have been launched by an expert team that is well-versed in LCC revenue and capacity management, and after analyzing the current consumer purchasing profiles and behaviors. These highly fenced and targeted are the best practices of all successful low cost airlines in the world. India is no different in terms of how the market reacts to price stimulation, said Sanjiv Kapoor, Chief Operating Officer (COO), SpiceJet Ltd.

"As a whole these campaigns have helped revenue performance and as well helped stimulate the travel industry and wider economy as a whole,he added.

Aviation consultancy firm Centre for Asia Pacific Aviation (CAPA) had earlier, in a February report, predicted that three Indian carriers Air India, SpiceJet and Jet Airways to post combined losses in excess of $1.2 billion (Rs 7,430 crore) in financial year 2014 (FY14), with Jet Airways and SpiceJet likely to report record full-year losses.

"And this figure could rise higher as a weak outlook for March could trigger further promotional pricing, the CAPA report added.

Air India and Jet Airways, along with IndiGo also rolled out similar fare discounts immediately after SpiceJet triggered the price war in February.

The total accumulated losses of the airline industry -- over the previous 7 years -- had risen to $ 8.6 billion based on the current exchange rate, the report further said adding, "Industry debt had climbed to $12.6 billion, however the full service carriers Air India, Jet Airways and Kingfisher accounted for 94% of this."