MUMBAI: The government’s decision of not allowing additional flights during peak hours to and from Mumbai and New Delhi is not likely to push up ticket prices in these sectors.

This is because demand lags behind capacity even in the country’s busiest sector.

“I don’t foresee companies getting away with any price hikes. Demand (between Delhi and Mumbai) is hardly seasonal in this sector. All that the government is saying no additional flights during peak hours. That doesn’t stop the airlines from introducing additional flights during off-peak hours,” says an analyst with a foreign brokerage who is underweight on the sector.

Airline sources say the supply between the two cities is over 10,000 seats a day, while demand rangers from 7,000-8,000. Hence there is still headroom for demand growth before the companies can push for a fare hike. Spot fares range from Rs 2,000 to over Rs 10,000 for a one way ticket, while promotional fares (including taxes) begin from Rs 1,000 plus. The next busiest sector is Mumbai-Bangalore.

“There won’t be any fare hike. There is enough capacity in the sector,” said Jet Airway’s marketing head Gaurang Shetty.

SpiceJet, which has six flights between Delhi and Mumbai, also does not forsee any price hikes. “Fear of competition would keep the airlines from implementing any price hikes. With a ban on new flights, atleast there won’t be blood bath,” says Ajay Jasra, spokesperson for SpiceJet.

Analysts say while in the peak fares won’t go up, airlines may get a little bit more flexibility in improving yield by reducing the number of discounted seats. Typically, even the full service carrier sells as many as half its seats below price. Now with no fresh supply, the number of discounted seats could reduce.

“We at SpiceJet won’t reduce the number of discounted seats. As much as 42% of our passengers are first time fliers. Instead if spending huge money on advertising, we spend on promotional fares, which act as our best advertising,” said Jasra.

According to an Indian official, though oversupply would ensure there would be no price hikes, most airlines work on dynamic fare system (fares goes up with demand) and would look improving their yield by reducing the number of discounted seats. “There could be some yield improvement,” the official said. Indian runs 11 flight between the cities. source: DNA

Viewed: 251 views | Rating: (No Ratings Yet)
 Loading ...