New Delhi:Are frequent fare discounts working for ailing SpiceJet, which has reported its fifth straight quarterly loss for the September quarter? The airline says these schemes are working and has even come out with details explaining exactly how. But it is tough to figure out whether the management's strong belief in frequent and deep discounts to stimulate demand is based on facts or short term euphoria.
People close to development at SpiceJet say that per se, these fare discounting practices are not wrong — what negates their impact in the long run is India's high cost operating environment and lack of pricing discipline in the industry. Put simply, this means discounts should be limited to a small number of seats per flight and should be used to attract incremental passengers - but their positive impact is likely negated because of India's notoriously high jet fuel prices and allegedly the high cost operation of SpiceJet when compared to peers like IndiGo.
Then, lack of industry pricing discipline means other low-cost carriers do not encourage higher spot fares or advance fares of upto seven days before travel - which perhaps compels SpiceJet to also follow suit. World over, LCCs continuously offer a limited number of deep discounted seats on almost every flight but then earn revenues from charging for ancillary services (like preferred seats, checked-in bags, hot meals) as well as raising prices for spot ticket purchases.
So while SpiceJet may have got half the pricing game right, it can do little to change a cussed domestic aviation industry which refuses to share the spoils in a manner of speaking.
After a twitter spat over the analysis of its September quarter results on Friday and Saturday, SpiceJet's Chief Operating Officer Sanjiv Kapoor issued a detailed statement on Sunday explaining how discounts had helped the airline.
Amazed at the doubts and scrutiny on our Q2 numbers. Guess people only want bads news. No such scrutiny of other listed airlines numbers???
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