Weak rupee,high ATF price push airlines to scale back offers

Airlines are scaling back discounts in the traditionally lean July-August season this year as they feel the pinch of a sliding rupee and higher ATF prices.

Airlines are scaling back discounts in the traditionally lean July-August season this year as they feel the pinch of a sliding rupee and higher ATF prices. Although airlines have cut fares by as much as 30% on select routes for 30-60 day advance bookings,discounts this year are not as steep as those offered in the last two years when airlines were willing to cut prices by half during this period.

Airfares last year were about 20% lower than those in the current year,even though airlines had cut back on discounts in the wake of the grounding of Kingfisher,said an official of a prominent travel agency.

After discounts,an average 30-day advanced round trip booking between Mumbai and Kolkata currently costs around R12,500,about 16-20% more than discounted ticket prices during July-Aug 2012,he said,adding that ticket prices in routes such as Mumbai-New Delhi,Mumbai-Chennai,Mumbai-Hyderabad and Mumbai-Bangalore,for 30-60 day advanced bookings are about 15-20 % higher than those offered in 2012.

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Though airlines are looking to increase their load factor during the lean season,they are not cutting fares drastically as they did till 2012, said Himanshu Singh,chairman at Him&Kays Group and former MD of Travelocity and Travel Guru.

After the profitability of airlines came under the scanner post the grounding of Kingfisher,airlines are very cautious about bringing down their air fares drastically, he added.

Most airlines offer heavy discounts during the lean season of July-August,when air traffic subsides heavily due to various factors like rains,re-opening of schools and colleges,decreasing number of leisure travellers,etc. However this year,the fall in the rupee and the resulting increase in ATF prices have prevented airlines from offering heavy discounts to limit losses even during the lean season.

The idea behind the discounts is to increase the load factor as much as possible during the lean July-September quarter. If airlines are able to get a higher load factor from lowering ticket prices,they will be able to minimise losses during this lean quarter of the year, said Vinod Wadhwani,director,Ambit Corporate Finance. This discount game should not be stretched too far to become a full-fledged price war between domestic airlines, he added.

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Meanwhile,some travel agents are expecting ticket prices to fall further in the next 30 days. We could see fares hit rockbottom in the coming days on select routes. Air India currently has the best 30-day advanced booking scheme. Others,like Indigo,are following suit, said Ashwini Kakkar promoter,Mercury Travels.

An Indigo spokesperson told FE that the airlines hasnt reduced its fares for the lean season while Air India officials couldnt be reached for comment.