Friday, Oct 24, 2014

DGCA grounds SpiceJet Re 1 ticket bonanza

The offer was actually limited to only 1.7 per cent of the total number of seats offered daily by the airline, said DGCA official. The offer was actually limited to only 1.7 per cent of the total number of seats offered daily by the airline, said DGCA official.
Written by Mihir Mishra | New Delhi | Posted: April 1, 2014 10:08 pm | Updated: April 1, 2014 10:12 pm

The Directorate General of Civil Aviation has asked SpiceJet to withdraw a discount scheme the low-cost carrier announced 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, with DGCA Prabhat Kumar learnt to have issued a notice asking the airline to immediately withdraw the 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 senior DGCA official.

In the past, the regulator had only raised its concerns over excessive discounts but had desisted from asking airlines to actually stop the scheme.  DGCA sources said 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 and that the revenue loss would be offset through other means and would thereby add to the airline’s ancillary revenue. It also claimed that these seats would otherwise have gone empty. Reached for comment, a SpiceJet spokesperson said the airline had not received any notice from the regulator.

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.

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