Indian aviation players must follow a selective pricing policy in order to maximise their revenues
“She stoops to conquer”! That’s the title of a hilarious play written by Oliver Goldsmith, which tells the story of Kate Hardcastle, a girl of wealthy lineage, who pretends to be a commoner to win over the love of Charles Malrow, a man who is uncomfortable with wealthy women! Analogously, Indian air carriers have stooped often in the past few years by slashing airfares to conquer the hearts of consumers, who are distinctly uncomfortable of their ‘class pricing’ act.
This was evident even recently when domestic Indian air carriers like Kingfisher, Air India, SpiceJet and IndiGo had slashed air fares by up to 50% in January to boost the dwindling air traffic (air traffic declined by 14.65% in January on a yoy basis). However, they haven’t stooped too long this time. Airlines have once again increased fares by 15-20% earlier this month. Jet Airways was an exception, as it was pressurised by the Civil Aviation ministry against doing so.
With this, tall claims of passing the benefits of the air turbine fuel (ATF) price cut to the consumers are biting the dust. If ATF prices have dropped by 60% in the last five months, then why this reverse pricing strategy? Well, ‘Charles’ refuses to be impressed this time around! According to reports by Centre for Asia Pacific Aviation (CAPA), after Indian air carriers slashed prices to lure back passengers in January, revenues of full-service carriers and low cost carriers fell by 50% and 40% respectively. Hatim Broachwala, Aviation Analyst, Khandwala Securities Limited, avers, “The strategy failed miserably and now they have gone for a reverse strategy to increase yields.” A majority of air carriers have completely scrapped the basic fare of Rs.1 to Rs.100 from their price bucket with immediate affect.
“She stoops to conquer”! That’s the title of a hilarious play written by Oliver Goldsmith, which tells the story of Kate Hardcastle, a girl of wealthy lineage, who pretends to be a commoner to win over the love of Charles Malrow, a man who is uncomfortable with wealthy women! Analogously, Indian air carriers have stooped often in the past few years by slashing airfares to conquer the hearts of consumers, who are distinctly uncomfortable of their ‘class pricing’ act.
This was evident even recently when domestic Indian air carriers like Kingfisher, Air India, SpiceJet and IndiGo had slashed air fares by up to 50% in January to boost the dwindling air traffic (air traffic declined by 14.65% in January on a yoy basis). However, they haven’t stooped too long this time. Airlines have once again increased fares by 15-20% earlier this month. Jet Airways was an exception, as it was pressurised by the Civil Aviation ministry against doing so.
With this, tall claims of passing the benefits of the air turbine fuel (ATF) price cut to the consumers are biting the dust. If ATF prices have dropped by 60% in the last five months, then why this reverse pricing strategy? Well, ‘Charles’ refuses to be impressed this time around! According to reports by Centre for Asia Pacific Aviation (CAPA), after Indian air carriers slashed prices to lure back passengers in January, revenues of full-service carriers and low cost carriers fell by 50% and 40% respectively. Hatim Broachwala, Aviation Analyst, Khandwala Securities Limited, avers, “The strategy failed miserably and now they have gone for a reverse strategy to increase yields.” A majority of air carriers have completely scrapped the basic fare of Rs.1 to Rs.100 from their price bucket with immediate affect.
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