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Airfare war ahead as AirAsia, SIA ready domestic flights

Tuesday, 13 May 2014 - 6:50am IST | Place: Mumbai | Agency: dna

Domestic airlines are gearing up for increased competition with AirAsia India and Tata-Singapore Airlines (SIA) set to fly soon.

Air Asia India, the joint venture between Malaysia-based Air Asia, Tata Sons and Telestra Tradespace, last week won an operating permit to launch its services in the country. Known for its aggressive pricing worldwide, the airline claims to offer 30% cheaper tickets than other airlines.

Tata-SIA joint venture is expected to take off by September this year.

With new players set to enter soon, the existing carriers are looking go full throttle to save their market share.

Already, led by SpiceJet, they have been offering discounted fares and promotional schemes for the past few months to ensure higher bookings.

Experts said they are expected to come up with more such schemes with the intensifying competition. Also, additional spend on marketing may also be in pipeline.

For example, Abu-Dhabi based Etihad Airways along with its equity partner Jet Airways announced a sponsorship deal naming both airlines as principal sponsors and official airlines for Mumbai Indians cricket team in the ongoing Indian Premier League.

According to an airline official, who refused to be named, "There will be a lot of activities by airlines for increasing their visibility. Higher spends on advertising and marketing can be expected."

"Passengers can get ready to be pampered," said Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG.

He said with competition intensifying, airlines will go for innovative and increased promotional spends, higher focus on on-time-performance and operational efficiencies, rationalisation of unprofitable routes and focus on specific geographies.

"There could also be customised packages for corporate travellers and tourists, re-introduction of loyalty programmes and a greater emphasis on ancillary revenues," he said.

A SpiceJet spokesperson said, "The airline is doing whatever it believes needs to be done to protect its interests commercially in an increasingly competitive environment where near-term overcapacity is a significant threat."

Despite discounted fares, the recent domestic air traffic figures released by the International Air Transport Association (IATA) showed that Indian airlines in March this year recorded a negative of 0.7% revenue passenger km (RPK), which measures actual passenger traffic.

"These promos have been revenue and contribution positive, and have helped manage the decline in load factors this year in the face of increasing industry capacity in a soft economy. It helped SpiceJet gain market share in March 2014 despite lowering its own capacity by 2%," said the SpiceJet spokesperson.

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