A month after they cut fares 25-30 per cent, the country's leading airlines have realised that the surge in passenger traffic they had expected has not happened. The first half of January saw bookings climb just 12-13 per cent, though last week the numbers went up 20 per cent after Jet Airways, IndiGo, GoAir and SpiceJet cut fares another 50 per cent.
"We cannot say that we saw a spurt of more than 10-11 per cent in our bookings. The southern routes were not doing too well for us. But our bookings have improved after the fare cuts announced last week," said a Jet Airways executive. Added SpiceJet CEO Sanjay Aggarwal: "The increase in demand has not been commensurate with the lowering of prices. These prices are irrational and will not sustain for more than a few days."
With jet fuel prices down, all carriers had slashed fares to boost sagging traffic. Though the move has improved average flight occupancy from less than 60 per cent to around 65 per cent now, industry experts said at current fares, airlines need to clock over 70 per cent occupancy to break even.
To deal with the situation, airlines like JetLite, IndiGo and GoAir have all slashed their fuel surcharges for a limited period to around Rs 1,290-Rs 1,999 from an average of Rs 2,700 earlier.
The airlines were banking on the low fares to result in huge advance ticket purchases. While the first week of January saw a 30 per cent increase in advance bookings, industry experts said that they have come down to almost nil now. This is not good news for the airlines: Mumbai-based brokerage firm Centrum has said passenger traffic will fall 19.3 per cent this quarter from a year ago.
Some in the industry have begun to wonder if price cuts work at all. "While some of our sectors like Delhi-Mumbai and destinations like Bangalore have given us a good response, traffic on flights to other destinations in Gujarat have either not reacted or stagnated instead of increasing," said Siva Ramachandran, head of global sales, Kingfisher Airlines.
