THE Directorate General of Civil Aviation (DGCA) has asked SpiceJet to withdraw a discount scheme the low-cost carrier announced on Tuesday under which tickets were being offered at a base fare of Re 1 across its domestic network.
This is the first time the regulator has cracked down on a discounted fare offering announced by a carrier. DGCA Prabhat Kumar is learnt to have issued a notice asking the airline to immediately withdraw the discount offer.
“We have asked the airline to discontinue the offer with immediate effect. The offer was actually limited to only 1.7 per cent of the total number of seats offered daily by the airline, which effectively means only around two seats per flight,” said a DGCA official.
When contacted, a SpiceJet source said that the airline has discontinued its offer. “The response to our Re 1 offer was huge and we have been able to sell all seats under that quota. We have discontinued that offer,” he said.
This is first time that the aviation regulator has asked any airline to discontinue its discounted fare offering. In the past, the regulator had only raised their concerns over excessive discounting of fares but desisted from asking the airlines to actually stop the scheme. DGCA sources said that SpiceJet had been asked for an explanation on the discounts, primarily on the ground that offering tickets at well below cost is tantamount to undercutting the finances of the carrier.
The airline responded by claiming that the inventory on offer was limited to only 1.7 per cent of the total seats on offer and that the revenue loss due to the sale of ticket at a cheaper cost would be offset through other means and would thereby add to the airline’s ancillary revenue. They also claimed that the seats, otherwise, would have gone empty.
It also claimed that these seats would otherwise have gone empty.
Tuesday’s offer was the fifth such by SpiceJet in the past six months. The airline, which posted a Rs 171-crore loss in the December quarter, has taken a lead in offering discounts that were subsequently emulated by other airlines.
This year, the carrier started the fare war on January 21 by announcing a 50 per cent discount on tickets for travel till April 15. It followed with a second offer of tickets starting Rs 1,999