SpiceJet offers 75% discount on summer fares triggering price war, IndiGo follows

Feb 26 2014, 10:41 IST
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The latest move by SpiceJet has forced other no frills or low cost carriers like IndiGo and GoAir to come up with similar offers. The latest move by SpiceJet has forced other no frills or low cost carriers like IndiGo and GoAir to come up with similar offers.
SummaryAfter SpiceJet, IndiGo, Go Air is also expected to announce summer discount fares soon.

said Vikram Malhi, GM, Southeast Asia, Expedia

Recently, a report by Center for Asia-Pacific Aviation (CAPA) said that Indian carriers lost $1.65 billion on revenue of $ 9.5 billion in FY13, while 40% of the annual loss was generated in fourth quarter (January-March 2013) period itself.

The fourth quarter is generally considered the weakest in the year, according to industry experts, when airlines often struggle to fill up its seats.

“The Indian consumer is evolving and seeing the pattern since last year, they have begun expecting such discounts more often. Typically what we have observed so far since last year is that whenever an airline has dropped fares or offered discounts on advance booking, other carriers have matched their pricing to keep their market share,” added Expedia's Malhi.

SpiceJet is estimated to need close to $200 million to remain operationally viable, while a turnaround may require $300 million or more for the airline, according to the above mentioned CAPA report.

“Given the negative net worth of over Rs 800 crore and loan liability of over Rs 1700 crore, funding the operations, going forward, would remain a very challenging task for the company,” a recent ICICI Direct report on SpiceJet added.

“These advance purchase offers are a win-win for customers, for airlines, and for the travel industry and the economy overall, as it leads to significant demand stimulation, customers get to enjoy deeply discounted fares, airlines get to reduce wastage of seats that would otherwise fly empty, and others in the travel Eco-system get more business,” said Sanjiv Kapoor, Chief Operating Officer, SpiceJet Ltd.

Spice Jet had earlier in January cut fares by more than half for three days, a move which was promptly followed by Air India and Jet Airways. The airline offered another round of discounts days later.

Full service airlines like Air India and Jet Airways meanwhile were not available for comments.

SpiceJet shares closed 0.74% up at Rs 13.70 on Tuesday on the BSE.

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