Airlines make about turn in downturn,jack up fares

The ultra-low airfares that you paid in January have vanished into where they had come from: thin air. Faced with low traffic and lower yields....

Smita Aggarwal & Shashank Shekharnew Delhi/mumbai | Published: February 11, 2009 1:58 am

The ultra-low airfares that you paid in January have vanished into where they had come from: thin air. Faced with low traffic and lower yields,the airlines have withdrawn the promotional offers they had announced with much fanfare in January this year. Unsure of how to wriggle out of current economic downturn,airlines have raised value fares by as much as 100 per cent on some of the traditionally busy routes.

“The fares will go up by as much as Rs 18,000 to Rs 2,200,” said Shahrukh Kapadia of the Travel Agents Association of India (TAFI). “All the Rs 99 and other fares are going,” he added.

“We have closed low-fare buckets on flights that can sustain higher revenue and are concentrating on higher fare buckets,” said a spokesperson from Kingfisher Airline,adding that the focus of the company was on earned revenue and not seat factors. However,a spokesperson from Air India said that they had repositioned their ticket prices at 10 per cent below the prices of full-service carriers and if consumers purchased Air India tickets online,they would be entitled to a further discount of 10 per cent.

While restoration of basic fares to the peak November 2008 level may be understandable,the hike in fuel surcharge by low-cost carriers is rather surprising. Despite the reduction in aviation fuel price by over Rs 1,000 in the last fortnightly revision on February 1,the no-frills airlines have upped the fuel surcharge by around Rs 800. “There seems to be no rationale behind the hike in fuel surcharge. The airlines will have to look into the matter and correct it in the coming days,” said Kapil Kaul,CEO (South Asia),Centre for Asia Pacific Aviation.

For a Delhi-Mumbai low cost-carrier ticket that cost around Rs 2,200 just a week ago,the flyer will now have to shell out close to Rs 5,000. Similarly value fares have more than doubled on busy sectors like Mumbai-Kolkata,Mumbai-Bangalore,and Delhi-Ahemdabad. Full-service carriers too have hiked the fares by almost 40-50 per cent,with Air India maintaining 10 per cent lower fares than them.

But the airlines argue that the January fares were promotional and intended for a restricted duration only. “These fares were introduced to stimulate market demand. The January traffic figures were not impressive at all,as compared with those in January 2008 or even December 2008. An airline can’t afford to have low fares and low occupancy,” said an airline official who did not wish to be named. Business-class travel,which accounts for a big chunk of airlines’ profits,had dipped lower than the November 2008 level on both domestic and international sectors,the official said.

Industry watchers think the fares should not have been hiked so suddenly,even though the traffic sank in January. “Even though a hike in fares was expected,increasing fares overnight by 40 -50 per cent is disturbing. This suicidal pricing will pull down passenger numbers even further,” Kaul warned. The third quarter ending in December 2008 saw an increase in net sales of Jet Airways,Kingfisher Airlines and SpiceJet despite higher fares. “Industry lost less money in third quarter this fiscal. The January fare cut didn’t result in a proportionate increase in traffic which seems to have convinced airlines to follow Q3 pricing,” Kaul added.

The travel industry is clearly unhappy with the move. “In first ten days of February,the passenger numbers were clearly improving. There was a growth in traffic of 2-2.5 per cent over February last year. With increased fares,it will immediately impact the travel,bringing it down drastically,” said Ankur Bhatia,executive director of Birdgroup,an integrated travel concern.

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