Airlines back with discounts; but profitability under pressure
Full-service carriers start offering fares as low as Rs 999 for one-way journey as budget airlines are doling out tickets for Rs 500 on various sectors. F-16: The Falcon
By PTI |
NEW DELHI: It's raining discounts from the sky, amid a cut-throat competition to grab a larger pie of market share, airlines are offering fares of as low as Rs 500, even though analysts are warning about an adverse impact on bottomlines, already burdened under high fuel prices.
While budget airlines such as Air Deccan, Jetlite and IndiGo are doling out tickets for Rs 500 on various sectors, full-service carriers like Air India are also offering fares as low as Rs 999 for a one-way journey.
Not to be left behind, carriers flying on international routes are giving out discounts up to Rs 5,000 on a ticket, besides offers like free hotel stay and 50-100 per cent waiver on companions' fare being announced by both domestic and international fliers for bulk bookings.
However, at the consumers' end, it is not as rosy as it appears on the ground. The discounted fares of Rs 500 and Rs 999, as being offered by the carriers, do not include taxes, transaction fees, fuel surcharges and other additional costs.
Actual fares after taking into account these charges turn out to be more than double of what are being advertised.
Still, the offers are a good bargain, as the discounted fares are still about half of the non-discounted ticket costs.
However, analysts expect these discounts, which has resurfaced after some gap, might cost dearly on the companies' profits for the fourth quarter of current fiscal as well as the first quarter of next fiscal. Most of these offers are valid till June 2008.
Citigroup analysts said in an equity research note on the Indian aviation sector that discounting has recommenced through the industry "after a 3-4 month lull during which players exhibited rational behaviour."
While budget airlines such as Air Deccan, Jetlite and IndiGo are doling out tickets for Rs 500 on various sectors, full-service carriers like Air India are also offering fares as low as Rs 999 for a one-way journey.
Not to be left behind, carriers flying on international routes are giving out discounts up to Rs 5,000 on a ticket, besides offers like free hotel stay and 50-100 per cent waiver on companions' fare being announced by both domestic and international fliers for bulk bookings.
However, at the consumers' end, it is not as rosy as it appears on the ground. The discounted fares of Rs 500 and Rs 999, as being offered by the carriers, do not include taxes, transaction fees, fuel surcharges and other additional costs.
Actual fares after taking into account these charges turn out to be more than double of what are being advertised.
Still, the offers are a good bargain, as the discounted fares are still about half of the non-discounted ticket costs.
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However, analysts expect these discounts, which has resurfaced after some gap, might cost dearly on the companies' profits for the fourth quarter of current fiscal as well as the first quarter of next fiscal. Most of these offers are valid till June 2008.
Citigroup analysts said in an equity research note on the Indian aviation sector that discounting has recommenced through the industry "after a 3-4 month lull during which players exhibited rational behaviour."
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