Air India Leads Fare War. Will this be a hit with the fliers ?

August 8, 2016.

Air India has been working hard on ways to revive its fortunes, reduce expenses and expand services. Air India is estimated to have posted an operating profit of Rs 80 million in 2015-16, mainly helped by steep fall in jet fuel price.

Air India chief Ashwani Lohani, who is about to complete one year as CMD Air India, has asked AI employees to stop presenting him with bouquets and do away with “petty courtesies” while ensuring that minimal number of officials are present to see him off at airports.

Air India has already barred its officials from using luxury cabs while travelling within the country.

The Civil Aviation Minister Ashok Gajapathy Raju said during Question Hour in Rajya Sabha, “After many years, this is the first year that Air India has not made an operating loss. It is going in the right direction and I think if this effort continues, it will be an airline we will all be proud of.”

Observing that Air India, despite its massive loans, is trying to stay afloat, he said, “Its financial status is fairly precarious. It has got a lot of loan. Historically it has come to it and they are doing their best to keep it afloat and to see that it performs second to none. We of course would like Air India to survive. So we are trying that on the government side and we are supporting it.”

Against such an optimistic backdrop, National passenger carrier Air India is now in the lead of the ongoing Air-fare war in India. It has announced a populist scheme : “Monsoon Sale”.

Sacrifice luxury, observe austerity, lure customers by offering discounts, & thus fill vacant seats. Air India now seems to have learnt its lessons.

Air India has announced discounts on select sectors in the economy class for travel on both domestic as well as on the international sectors. Air India cited that the offer can be availed on more than 250 domestic sectors for travel between August 22 and September 30, both days inclusive. It said in a statement:

“Under this offer, available from 9th to 15th August 2016, Air India flyers can book tickets at amazingly low fares starting at INR 1,199/- (all-inclusive one-way fare) and INR 15,999/- (all inclusive) on its select domestic and International sector respectively. On the International network, the sale is valid on select return flights (ex India only) for a travel period from September 15th to December 15th 2016 (both days inclusive) for commencement of journey.” “

Other airlines in India are also forced to follow Air India. Various other airlines have also announced discounted fares to attract flyers during the lean travel season. The periods between January-March and July-September are considered to be lean travel seasons. Airlines have to offer these kinds of special fares not just to increase load factors, but also to stimulate demand, during the lean seasons.

Will these promotions be a hit with the fliers ?

Budget passenger carrier SpiceJet too came out with discounted air fares under its “Great Independence Day sale” scheme.

SpiceJet said under this scheme, it will offer one-way fares as low as Rs 399 base fare (surcharge and taxes extra as applicable) for travel to select destinations on its domestic network and the international fares start at Rs 2,999 base fare (surcharge and taxes extra as applicable) for non-stop direct flights.

According to SpiceJet, the three-day sale will be open till midnight August 11 and the travel period covered is from August 18 to September 30. The airline added that it is also offering attractive fares on various direct flights across the network. As a caution, SpiceJet said, “There is limited inventory under the offer, and seats will be available on first-come, first-served basis. Sales fares are not applicable on group bookings and cannot be combined with any other offer. The offer is applicable only on non-stop flights and fares vary from sector to sector depending on the travel distance and flight schedules.”

Another LCC IndiGo announced its discounted air fares offer starting at Rs 806 for travel on its domestic network. It should be noted that IndiGo had earlier said that its average fare costs INR 

The timing of such announcements coincides with a long rakhi weekend coming up. India’s Independence Day is just around the corner. It is a great time for a quick getaway for Indian air travelers. 

Air India Soars on More Promotional Schemes

India’s aviation industry is currently witnessing a big fare war. When it comes to natural air fare war, it seems that the senior most Airline in the country, Air India, often has a leg up on new airlines. Air India does not want to lag behind. It intends to defeat all its rival airlines and attract passengers through lowest fares. The end user, the flier, has no complaints.  The flier does not see anything wrong with AI’s increased publicity campaigns.

So many plane players…. Air India is one of them.

“It’s tough to fight in terms of market share as the private airlines are adding capacity at a frantic pace. As a government airline, we don’t have the luxury to do so,” says a top official of the Air India. Aiming to attract more fliers and achieve higher seat occupancy in its flights on trunk routes, National carrier Air India has decided that it will be providing “unbeatable metros fare” to domestic passengers willing to return the same day from July 25, 2016.

Air India is now realising that it needs to market itself and grab visibility. It is pulling out all the stops in its high-decibel promotional offers and advertising campaigns. As part of the pricing strategy, Air India will drop fares on four key routes, Delhi-Mumbai, Delhi-Chennai, Delhi-Kolkata and Delhi-Bengaluru, for tickets booked four hours before departure. Air India has an average load factor of 74 per cent across its domestic network while the seat occupancy on these routes is around 80 per cent.

Speaking to media, S Venkat, Air India Finance Advisor, said, “We are going to introduce new scheme for our all passengers who want to return same day flights in metro cities. Fares will be minimum Rs 5,000 and maximum Rs 10,000.”

“This is very attractive fare for all passengers. I am sure this scheme will attract the flyers as the fare is affordable. Earlier, we had launched “equal to Rajdhani fare” scheme, which had received good response. Now, we are launching the special fare scheme,” he added.

Last month, Air India had floated a scheme to fly unconfirmed passengers of Rajdhani trains at fares matching with the AC first class ticket prices. A Mumbai-Delhi air ticket is now available upwards of Rs 3,700 for next day travel on all airlines, while a Rajdhani AC first-class ticket costs Rs 4,755.

These have resulted in improved sales and better engagement with the trade. Ticket sales are rising on travel portals. Air India is engaging with agents and is implementing more customer-friendly initiatives. AI has also agreed to agents’ requests for web parity in fares, offering the same levels on its website and other portals. Thus, bookings for AI this year on travel portals like NC Airways, have increased with especially strong growth in long-haul international flights.

In FY16, the airline cut its losses to Rs 2,636 crore from Rs 5,859 crore in 2014-15, mainly due to a Rs 2,754 crore saving in fuel. “Fuel, of course, helped but I believe the turnaround has been due to efficiency in the management. We are now running the house like a proper corporate,” says Ashwani Lohani, Air India’s CMD.” He is of the view : “A professional firm cannot function on crutches. We want to fly, fly and fly more.”

Air India’s decision to reduce fares is likely to leave its rivals uncomfortable as they have been accused of raising the fares by 2-3 times for last-minute bookings.

Exit VRL; Few Takers Left for Centre’s Regional Connectivity Scheme

Government’s Regional Connectivity Scheme finds few takers.

Experts and airlines question lack of clarity, price cap.

VRL Logistics drops its civil aviation foray.

Even as the Central Government has grand ambitions to promote regional air connectivity, questions have been raised on whether the proposed policy will ever take off or not.

The Centre has proposed a Regional Connectivity Scheme by offering concessions to the airlines to fly on regional routes. The draft policy puts an airfare cap of Rs 2,500 for an hour’s flight on remote routes to be covered under the scheme.

aeroplanes by shah juniad

Experts have raised questions over a lack of clarity in the policy. “There needs to be a further clarity on the regional connectivity scheme and concessions, which are being offered under it. Also the policy states that concessions will be offered to a new category of scheduled commuter airline. It is not known whether the existing regional airline permit holders will be entitled to those benefits under the regional connectivity scheme,” said aviation expert Anurag Jain.

“CRISIL Research believes this move would cap the prices on regional routes, which is a negative for airline companies given the government intervention and price control. Besides, more details are awaited in terms of whether a fare of Rs 2,500 per hour will be capped even for a last-minute booking, identification of specific routes and associated regional impact, if any, and specific modalities and procedures to be adopted in administering this scheme,” said CRISIL Research in a detailed note.

VRL Logistics Ltd has decided to drop its civil aviation plans. As reported earlier, its promoters were very keen to take active part in the Regional Air connectivity scheme. 

ReadBizarre Story of VRL Logistics: Will its Airline Idea Prove Deadly ?

Chairman and Managing Director Vijay Sankeshwar, in a stock exchange filing on July 20, 2016 said: “We have decided to drop the plans for an entry into civil aviation space.”

The company had plans to enter the civil aviation industry by incorporating a separate company to undertake the business of a regional airline.

“Subsequently, there have been several developments including the announcement of the new aviation policy by the Centre. The regional connectivity related aspects listed in the said policy do not augur well with our planned business model envisaged for the proposed activity,” Sankeshwar gave reasons for dropping the plan.

The exit of VRL Logistics from the proposed Regional Air connectivity scheme marks the beginning of the end of the scheme itself. 

Among national airlines, only Air India has shown some interest in participating in the regional connectivity scheme mooted by the Union civil aviation ministry in its draft policy released in June 2016.

“Yes. We’ll become a part of the scheme. We’re giving a big push to regional connectivity and have already written to all the state governments. We’re adding three new ATR72 (turbo prop regional aircraft) in the next two months and shall be adding 10 more next year to our subsidiary Alliance Air. The scheme is excellent and would go a long way in meeting national objectives,” Air India Chairman and Managing Director Ashwani Lohani has told media.

AI chairman and managing director Ashwani Lohani
AI Chairman and MD Ashwani Lohani

Regional or short routes operators having smaller aircraft in their fleet :

-Air India (6 ATRs and 3 CRJs),
-Jet Airways (18 ATRs) and
-SpiceJet (14 Bombardier Q400).

Other scheduled operators in India such as Air Costa, Air Pegasus and TruJet also operate regional aircraft.

Experts and airlines have criticised the regional connectivity proposals for its lack of clarity. Global experiences had shown in the past that the aviation industry acted as a key factor for overall economic development. In absence of an environment conducive for the aviation industry’s growth through clear-cut policies, India has now been put to a great disadvantage. The global standing of India in the aviation industry might see a big setback since India gets a lot of attention from foreign investors and carriers because of its exploitation of its burgeoning consumer market.

air costaAn Air Costa spokesperson said the airline was keen to participate in the regional connectivity scheme. However, it would “like the concessions to be extended to aircraft with 120 seats.” At present, the proposed policy offers a slew of incentives, including viability gap funding to aircraft with 100 or less seats.

Air Costa also opposed the move to cap fares at Rs 2,500 an hour on regional routes. “Price cap cannot be a long-term solution and it will not incentivise airlines to perform better. Rather, the government could consider a fare band for the regional routes,” the official added.

GoAir had no immediate plans to fly to remote areas and will continue to operate a single aircraft type (Airbus A320s). 

IndiGo has denied forming a subsidiary to cater to regional routes in the near future.

R-N-Choubey-Civil-Aviation-SecretaryThe Union government also feels the policy will suit the regional carriers more than the national ones. “We don’t think other (national) carriers will go there at all. It depends on an airline’s business model. Normally, airlines don’t like multi-configuration aircraft. It’s difficult to have separate facilities for them. In this case, these airlines might decide to have a subsidiary for regional connectivity,” Civil Aviation Secretary R N Choubey had said.