These rock bottom fares are likely being offered to ringfence SpiceJet from AirAsia India's imminent arrival - the ultra low cost AirAsia has already let it be known that it will not shy away from offering one rupee fares to stimulate demand.
Nine years after Air Deccan became the first ever Indian airline to offer 'One Rupee" fares, SpiceJet is following suit. The LCC promoted by the Sun Group announced fares starting at just a rupee this morning for limited seats, if bookings are done between today and Wednesday.
Of course, taxes and other fees are extra. We all know what happened to Air Deccan. Though it managed to stimulate the domestic aviation market, getting more people than ever to fly, it then itself flew into history as losses mounted.
SpiceJet has taken this bold step today, which marks the start of its all-new summer schedule. These rock bottom fares are likely being offered to ringfence SpiceJet from AirAsia India's imminent arrival - the ultra low cost AirAsia has already let it be known that it will not shy away from offering one rupee fares to stimulate demand. In fact, the new chief commercial officer of SpiceJet, Kaneswaran Avili, is an old AirAsia hand and today is his first day at SpiceJet.
Not just SpiceJet, we expect others like IndiGo and GoAir and later maybe even Air India and Jet to jump onto the "One Rupee" bandwagon. It would be better for the airline industry if these airlines did not follow SpiceJet's do-or-die fare strategy though.
SpiceJet said in an early morning statement that in addition to the Re 1 offer, discounted fares are also available for Rs 799 and Rs 1,499. The limited seats offer is available for bookings made in the period 1 April to 3 April, 2014 only. These tickets are valid for travel between 1 July 2014 and 28 March, 2015.
Kaneswaran Avili said in the statement that “We have been at the forefront in the Indian market in stimulating demand by offering discounted fares. These offers have served as a catalyst for travel for many potential flyers willing to plan and book early.”
Desperate for a turnaround, ailing SpiceJet has taken several other measures besides frequent fare sales to turn around. Last week, we reported how it has decided to add a variable component to the pay cheques of its pilots, depending upon the amount of jet fuel they save. Bloomberg has estimated a record loss of Rs 900 crore last fiscal ending 31 March, 2014 for the airline. This will be the third straight year of loss for SpiceJet.
Speaking exclusively to INNLIVE earlier, chief operating officer Sanjiv Kapoor had said several other cost reduction measures are also being planned by the airline. Extensive network changes which came into effect this Sunday include cutting flights to four domestic and many international destinations. Kapoor had said these will further reduce the company's expenses as they are meant to reduce requirement of crew for each flight by 20 percent.
Kapoor had said extensive network restructuring should help the airline turn around quickly. He pointed out several domestic and international destinations where changes have been made. So all flights to Bangkok (which were started a few months back) are being pulled out from Pune and Banaglore. The airline may start flights to Bangkok from either Kolkata or Chennai later this year.
Guangzhou-Delhi and Riyadh-Delhi have already been suspended; Guangzhou-Kolkata may be started later this year. New flights to Hong Kong from Kolkata are being launched but those to Sharjah from Varanasi and Lucknow are suspended.
Kapoor said these network changes were being done so that all flights which are more than four hours are pulled out.
SpiceJet is already reducing its total capacity (no of seats) by 7-8 percent and has agreed to return 4 aircraft to lessors. Lease of two others is expiring so they will also be returned.
Earlier, aviation consultancy CAPA had estimated that SpiceJet needs close to $200 million to remain operationally viable, "while a realistic and meaningful turnaround may require $300 million or more.”
No comments:
Post a Comment