Indian domestic advance bookings well up in lean period – But why?

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By TESTCustomwebLP TESTCustomwebLP January 22, 2014 11:34

Indian domestic advance bookings well up in lean period – But why?

The Indian airline market battle for market share has today gone turbodrive as Air India, IndiGo GoAir and SpiceJet have all announced sales on 30-60 day advance purchases at 50% discount across all major sectors. SpiceJet has dropped fares between Delhi and Mumbai to just Rs 2,830 and Bangalore to Delhi to Rs 3,444. These price points are well below the previously considered breakeven points for these routes based on a full aircraft.

The discounts are valid on travel at least 30 days after the day of the booking, and up to April 15, 2015.

The Air India approach is more moderate. It is offering up to 50% discount for all domestic air tickets booked between January 22 and 24, for travel between February 21 and April 15. But that means the Air India key Delhi-Mumbai route will cost just Rs 2,830, with Delhi-Ahmedabad at around Rs 2,292. This is some 30% odd below current breakeven on the average 82% capacity figures for the route (at best).

Interestingly Jet Airways has not got in on the fare war yet. The question is will it? If it does not then bookings and market share for the period will fall. If it does then it will need another cash injection. Jet would be wise to stay out of this battle right now and then present a slight cut in prices during the high season when the other airlines will be unable to match them without causing further damage to the balance sheet. But this market is India – the most price sensitive in the world – and these cuts have seen a massive jump in ticket sales by 250% within hours of the sales and that means cashflow for the airlines – so there is logic to the move.

Into this market BOC Aviation is putting more aircraft as it gets set to supply the Tata-SIA venture with aircraft. Tata-SIA is looking for 20 A320 aircraft and BOC Aviation will get part or all of that deal. Tata-SIA is due to start flying in the second half of 2014 around the same time as the AirAsia-Tata joint venture – AirAsia India.

So is there any room for the two new low-cost entrants to turn a profit? Capture of traffic and routing it internationally is the aim of SIA and AirAsia but any gain on the international traffic could well be lost on the domestic routes at this rate. The managers at both of the new joint ventures are treading a fine line indeed and the key will be to shift as many passengers as possible to Singapore and Malaysia, that will require something larger than an A320 to get the economics right.

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By TESTCustomwebLP TESTCustomwebLP January 22, 2014 11:34
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