Indian aviation players must follow a selective pricing policy in order to maximise their revenues
However, Prakash Mirpuri, spokesperson for the UB Group (which owns Kingfisher Airlines) told B&E, “Kingfisher Airlines follows a dynamic pricing policy for each flight depending on demand. For flights that can sustain higher revenue, we’ve closed low fare buckets and are concentrating on selling higher fare buckets.”
On the other hand, chances that Indian air carriers have formed a cartel (as all & sundry have raised their respective air fares at the same time) is also not being ruled out as Civil Aviation Minister Praful Patel recently warned all air carriers against following such practice. The earlier strategy of low fares was in tune with the fall in the ATF prices (which accounts for more than 45% of the airline costs). But the players overlooked the fact that cut in airfares could easily negate the advantages of the fall in ATF prices, thereby hurting revenue generation and further aggravating operating losses. Binit Somaia, Regional Director, CAPA, professes, “With the fall in oil prices, airlines took the opportunity to introduce promotional pricing to stimulate traffic. However, rather than applying promotional pricing selectively, airlines offered their entire inventory at discounted levels, which resulted in significant dilution of revenues.” Bottom lines of all major players have already been painted red for quarter ended December 2008. Jet Airways, Kingfisher Airlines & Spice Jet have recorded losses to the tune of Rs.2.14 billion, Rs.6.26 billion & Rs.180 million respectively. Experts are expecting an accumulated loss of $2 billion in aviation 2008-09, further forcing players to raise fares to balm their bleeding bottom lines.
Sweeping price cuts or raises will not help. They have to stoop selectively, and carefully analyse which routes would respond positively to price changes and which would not so they can maximise revenues. They will need every rupee they can lay their hands on to repair their bleeding balance sheet.
However, Prakash Mirpuri, spokesperson for the UB Group (which owns Kingfisher Airlines) told B&E, “Kingfisher Airlines follows a dynamic pricing policy for each flight depending on demand. For flights that can sustain higher revenue, we’ve closed low fare buckets and are concentrating on selling higher fare buckets.”
On the other hand, chances that Indian air carriers have formed a cartel (as all & sundry have raised their respective air fares at the same time) is also not being ruled out as Civil Aviation Minister Praful Patel recently warned all air carriers against following such practice. The earlier strategy of low fares was in tune with the fall in the ATF prices (which accounts for more than 45% of the airline costs). But the players overlooked the fact that cut in airfares could easily negate the advantages of the fall in ATF prices, thereby hurting revenue generation and further aggravating operating losses. Binit Somaia, Regional Director, CAPA, professes, “With the fall in oil prices, airlines took the opportunity to introduce promotional pricing to stimulate traffic. However, rather than applying promotional pricing selectively, airlines offered their entire inventory at discounted levels, which resulted in significant dilution of revenues.” Bottom lines of all major players have already been painted red for quarter ended December 2008. Jet Airways, Kingfisher Airlines & Spice Jet have recorded losses to the tune of Rs.2.14 billion, Rs.6.26 billion & Rs.180 million respectively. Experts are expecting an accumulated loss of $2 billion in aviation 2008-09, further forcing players to raise fares to balm their bleeding bottom lines.
Sweeping price cuts or raises will not help. They have to stoop selectively, and carefully analyse which routes would respond positively to price changes and which would not so they can maximise revenues. They will need every rupee they can lay their hands on to repair their bleeding balance sheet.
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