Why are airlines keen to offer seats at throwaway price?

Moneycontrol Bureau

After going through a tough year with low demand amid excess capacity, airlines have of late announced bumper sale one after the other, which was unheard of in past two years.

At the beginning of the year, SpiceJet surprised the industry by announcing fares at Rs 2,013 for travel between March and April followed by today's mega offer put up by Jet Airways with fares ranging from Rs 2250 to Rs 3500 on 57 routes .(Full report)

Indigo too has put up an around 50 percent discount on travel portals on selective routes.

Why are airlines keen to sell below the belt?

Of the 1.6 crore seats that Jet Air has on offer annually, hardly 12 percent of it will be available at discounted rates. With a 75 percent load factors, the airline has already achieved breakeven levels in most sectors. Anything above this level is incremental profit, says an analyst.

It is a very good marketing gimmick adopted by the airline. On any other day, if one books a ticket on Mumbai-Goa sector a month in advance, he would get it at Rs 2,500. After the sale announcement, impulsive buyers have checked websites to book a seat. In reality, there are seats available at Rs 3,500, as the offer is with many riders. The airline will charge some amount, if in case there is any last minute cancellation.

A member of Travel Agents Association of India says, "One might not get a seat on high density routes like Delhi-Mumbai or Mumbai-Bangalore. Barely two or three seats are available on each flight, that too on regional destinations."

Jet Air has in the past few months lost leadership position to IndiGo whose fleet size is a third of the former. This mega sale will push up loads.

Both carriers (Jet Air and IndiGo) are parallely slashing of fares to enhance the occupancy levels, to raise resources, and generally be more competitive. This is the way the industry seems to be shaping up, say experts.

Will customers benefit?

No, they will not have any advantage by booking in sale period. The airline is doing a balancing act by offering more seats on low density routes, which otherwise is available at same rate, if booked in advance.