Air India has stiffed up competition in the domestic aviation sector by offering fliers tickets priced at ₹100 (apart from taxes), in a five-day sale, ostensibly to celebrate "Air India Day" as a mark of its merger with the erstwhile Indian Airlines in 2007.
However, if history suggests anything, such price wars among domestic carriers in India may spell good news for fliers, but could only mean trouble for the airlines.
Aggressive pricing has been the norm ever since low-budget airlines such as SpiceJet and IndiGo came into the picture with their 'affordable' tickets. While the fare war is extremely heated among the four carriers, namely IndiGo, Jet Airways, JetLite, and SpiceJet, Air India's move hints at a desperation to ensure it is still in the reckoning with fliers.
AirAsia added to the competition earlier this year by promoting tickets for as low as ₹5 (apart from taxes) for its Bangalore-Goa and Bangalore-Chennai flights. IndiGo had later responded with a promotional offer of ₹1 just a few days later.
These airlines are ready to sacrifice profits for market shares, and the numbers reflect accordingly.
Just last week, SpiceJet claimed to have toppled Jet Airways in market share to emerge as the second biggest carrier in India for the first time. It said that it now controls 20.9 percent of the domestic market ahead of Jet Airways and JetLite's 19.6 percent share, The Economic Times reported. IndiGo continues to lead the market with a 30.7 percent share.
However, even as these achievements come from aggressive pricing, SpiceJet recorded its fourth straight quarterly loss with a loss of ₹124 crore in April-June.
In 2013-14, Air India reported losses of ₹5,000 crore, largely because of the weak rupee that had inflated fuel costs and other expenses. Jet Airways had also reported its highest annual loss of ₹ 4,129 crore in the same period.
But these airlines continue to incur losses to ensure they do not have to fly empty planes, and Indians are lapping up the offers.
As per a survey by Go Euro, flights in India are cheapest in the world, as it costs just $10.36 for a 100-km travel by flight in India, followed by Malaysia ($11.43) and South Africa ($11.63).
As rail fares rise, many Indians now prefer to travel by air, with the total number of passengers in January-July this year reaching 376.28 lakh, as per the Directorate General of Civil Aviation.
While an expanding customer base is good news for airlines, stiff competition means that they often charge fliers below the total cost incurred.
The best example for what the fare war can lead to is, of course, the Kingfisher Airlines.
Launched amidst much fanfare in 2005 and even taking over Air Deccan in 2007, the aircarrier was hit by competition, high fuel prices and interest rates, which led to a bigger crisis of strikes by employees over non-payment of salaries and compounding losses.
Thus, it can only be construed that while a ₹100 offer may seem exciting, it could only mean short-term happiness, as airlines would once again have to push up prices if they have to survive.
