Jet Airways escalates price war, offers 20 lakh tickets at rock bottom rates

In A dramatic strategic decision, full fare carrier Jet Airways decided to play price warrior by offering 20 lakh low fare seats to garner volumes during the impending lean season. With this, the price war in India's aviation sector escalated on Tuesday as the Jet Airways bonanza fares mirrored what low cost carrier SpiceJet had offered last month . Analysts say other airlines are likely to follow suit.

Jet Airways announced special fares as low as Rs 2,250, inclusive of all taxes, for a one-way journey on over 450 daily flights across 57 destinations.

It has put 20 lakh seats on sale for the next six days ending February 24. The offer is valid for both Jet Airways and its no-frills subsidiary Jet Konnect. Tickets purchased during these six days will be valid till December 31 and fliers can travel on any day during the validity period.

SpiceJet had last month announced a similar package by offering a limited-period sale of 10 lakh seats across its domestic network for an allinclusive fare of a mere Rs 2,013 for a one-way trip.

Four slabs

Jet has introduced four different slabs for these one-way fares, based on the travel distance and the fares are inclusive of all taxes.

Under the offer, the fare up to 750 km is priced at Rs 2,250, while for 750-1,000 km it is Rs 2,850. Similarly, fare for destinations between 1,000 and 1,400 km is pegged at Rs 3,300. Tickets for destinations beyond 1,400 km are priced at Rs 3,800, the airline said.

While SpiceJet sold tickets for travel between February 1 and April 30, Jet Airways has put its tickets for sale for travel till the end of this year, making its offer more attractive.

The Jet offer generated a massive response from passengers.

The airline's booking site experienced heavy traffic due to which visitors were unable to book tickets for a major part of the day.

"This nationwide low-fare sales offer is a goodwill gesture to our loyal guests who will now be able to plan and schedule their travel much in advance, especially during the holiday season, while benefiting from these special fares," Jet Airways group chief commercial officer Sudheer Raghavan said.

Travel portals are very happy with the offer. "The discounted fares would prompt people to travel, even if they had not actually planned a trip. These are fantastic fares," said an official with MakeMyTrip.com.

Airlines' revenue drops in the fourth quarter. This is a period when airlines usually offer discounts on tickets because February-March is a lean period for leisure travel by air.
 

Improve profits

An aviation sector analyst with ICICI Securities said the move will enable carriers to improve their profits and gain market share.

Kapil Kaul, CEO, South Asia, of Centre for Asia Pacific Aviation (CAPA), said there is a huge appetite for low fares in India and other airlines will logically follow suit.

"They (Jet Airways) should be able to do substantial bookings to meet the target of 20 lakh seats which are on offer for sale. These are tactical strategies to stimulate the market.

The offer is not for the entire flight. It is for a limited inventory. Basically the offer is for an off season,'' he said.

"There is nothing wrong in building up an advance booking market and building a limited inventory and stocking up cash for the future. Unfortunately we do not have that in India. This would help the carrier in raising funds," he explained.

Kaul said that this would stimulate the market. "I do not see that as negative. It would stimulate the market. You generally have a lean season between February and April. This, I think, is a good move before busy season that would begin around May," he added.

Similar schemes have also been launched in the recent past by other airlines to boost their passenger loads. Air India had slashed fares significantly in November with its 'Jaldee Jaldee' sale, though short-haul flights were cheaper then. IndiGo, too, had cut its fares at the time.

Aviation companies are witnessing a steady decline in passenger traffic but have been increasing fares since the beginning of 2012. The last fare hike by carriers was during September 2012 when they hiked fuel surcharge from Rs 150 to Rs 250 for domestic travel and Rs 825 for a one-way international ticket after jet fuel price was hiked by a steep 7.6 per cent on August 31 and 17 per cent since July this year.

SpiceJet and Jet Airways posted profits in the first quarter of the current fiscal year, but reported losses in the second quarter. Both the airlines fared better in the third quarter ending December 31, 2012 with Jet Airways reporting a net profit of Rs 85 crore while SpiceJet logged Rs 102 crore.