Feb 20, 2013, 05.32 PM | Source: Moneycontrol.com

Why are airlines keen to offer seats at throwaway price?

After going through a tough year with low demand and excess capacity, airlines have of late, announced bumper sale one-after-another.

Moneycontrol Bureau

After going through a tough year with low demand amid excess capacity, airlines have of late announced bumper sale one after the other, which was unheard of in past two years.

At the beginning of the year, SpiceJet surprised the industry by announcing fares at Rs 2,013 for travel between March and April followed by today's mega offer put up by Jet Airways with fares ranging from Rs 2250 to Rs 3300 on 57 routes .(Full report)

Indigo too has put up an around 50 percent discount on travel portals on select routes.

Why are airlines keen to sell below the belt?

Of the 1.6 crore seats that Jet Air has on offer annually, hardly 12 percent of it will be available at discounted rates. By recording around 75 percent load factors in past few months, the airline has already achieved breakeven level in most sectors. Anything above this, can be considered incremental profit, says an analyst.

It is a very good marketing gimmick adopted by the airline. On any other day, if one books a ticket on Mumbai-Goa sector a month in advance, he would  anyways get a seat at this price. The offer comes with many riders including levy of some charge, if in case there is any last minute cancellation.

A member of Travel Agents Association of India says,  "One might not get a seat on high density routes like Delhi-Mumbai or Mumbai-Bangalore. Barely two or three seats are available on each flight, that too on regional destinations."

Jet Air has in the past few months lost leadership position to IndiGo whose fleet size is a third of the former. This mega sale will push up loads.

Both carriers (Jet Air and IndiGo) are parallely slashing of fares to enhance  occupancy levels, to raise resources, and generally to be more competitive. This is the way the industry seems to be shaping up, say experts.

Will customers benefit?

No, they will not have any advantage by booking in sale period. The airline is doing a balancing act by offering more seats on low density routes, which otherwise is available at same rate, if booked in advance.

Jet Airways stock price

On November 30, 2015, at 11:57 hrs Jet Airways was quoting at Rs 510.00, up Rs 4.20, or 0.83 percent. The 52-week high of the share was Rs 543.50 and the 52-week low was Rs 248.50.

The latest book value of the company is Rs -387.83 per share. At current value, the price-to-book value of the company was -1.32.

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