TLI Staff
New Delhi: In what suggests poor cash flow and dwindling demand for air travel, the two leading carriers SpiceJet and IndiGo have come up with promotional sale of tickets on select routes.
The low-cost carriers have offered cheaper fares even as yield per passenger has declined in the last two months due to rise in jetfuel price and slower growth in demand after it peaked post opening of domestic skies in May last year.
Airlines usually offer concessional tickets when faced with pressure on their cash flows. They also come up with discounted tickets to stimulate demand in the market.
According to brokerage firm Motilal Oswal, airline fares in 2020 had a lower floor and cap than the one imposed by the government in the wake of Coronavirus pandemic to ensure passengers are not fleeced by the air-carriers.
“Reflecting on airfares since May, as per our airfare tracker, fares peaked in October, 2020 (up 40%), led by pre-festive demand. However, we saw a drop of 14-21% in airfares for the month of November–December’20 (versus October),” Motilal Oswal said in a report earlier this week.
Kicking off discount on tickets, SpiceJet had on Wednesday rolled out a five-day limited period sale offering one-way fares starting as low as Rs 899 for travel on the airline’s non-stop domestic flights.
As per a company statement, the five-day sale will be open till midnight of January 17th, for travel between 1st April and September 30th 2021. Some of popular routes available under the offer include Jammu-Srinagar, Srinagar-Jammu, Bengaluru-Chennai, Chennai-Bengaluru, Hyderabad-Belagavi, Belagavi-Hyderabad, Ahmedabad-Jaisalmer and Jaisalmer-Ahmedabad.
Responding to this, IndiGo announced a similar deal for the travellers. The sale, effective from January 13, 2021 to January 17, 2021, will offer customers all-inclusive fares on domestic flights for Rs 877. The sale is valid on travel from April 1, 2021 to September 30, 2021.
“Customer confidence in air travel has strengthened over the last few months, as it is the safest mode of transport. The advent of the vaccination has further improved the sentiment, with people looking at travelling within the country this year. This sale will help them plan domestic travel in advance and at affordable fares,” said IndiGo’s Chief Strategy and Revenue Officer Sanjay Kumar.
Motilal Oswal in its report noted that an increase in crude oil prices, along with yield declining from current levels, would lead to a double whammy impact on companies’ profitability.
With vaccination drive against Coronavirus starting soon, experts and industry watchers hope that confidence of people in flying would increase. Also, the reopening of physical offices would require migrant employees to fly back to their job cities leading to higher demand for travel.
But at the same time, there is possibility of passenger growth slowing down as a result of decline in business travel and foreigners travelling on domestic routes.
With travel and hospitality sector being one of the worst-affected sectors from the pandemic, airlines have been bleeding profusely quarter after quarter.
“Over the next 15 months through to the end of FY2022, the pain inflicted by COVID may become more visible than has been the case to date,” Centre for Asia Pacific Aviation (CAPA) said in a recent report.
“For much of 2020, the grounding of a significant proportion of operations provided a protective umbrella of sorts, as liabilities with staff, lessors, banks and other vendors were negotiated, deferred or waived. But as activity recovers airlines will increasingly have to pay for resources and services and this will expose those with limited cash,” it added.