Airlines keep low fares longer to buck oversupply

Breaking with tradition, airlines are holding on to lower fares until just 2-3 days prior to departure, purportedly to ensure their aircraft are filled to capacity.  Hitherto, the practice was to raise prices gradually closer to departure.

Lower prices are aimed at increasing the passenger load factor, a senior official of the International Air Transport Association said. In July, all domestic carriers barring low-cost carrier GoAir flew fewer people in their aircraft compared with June. At 72.7%, the industry’s seat factor for July was well under 76.7% for June and 78.3% for May.

According to Tarique Khatri, VP - business development, Cleartrip.com, 50% of the bookings taking place within one week of travel are of corporate travellers. “With corporate travel picking up slowly, airlines are cashing in and not increasing fares until the last minute,” he said.

“Airlines are not dropping fares, but are keeping them low, so as to push both yields and revenues,” said Keyur Joshi, COO, Makemytrip.com. A senior GoAir official conceded the trend but tried to make light of it. “It’s a lean period trend and would have passed by the beginning of October,” he said.

A senior Jet Airways official said the move was aimed at tackling overcapacity. “We are constantly trying to move our yields upwards and have a sensible pricing schedule. This goes against that basic principle,” he said. “But this is only a short-term measure.”

“Though this goes against the principle of the aviation industry, the situation is soon expected to change, and the Indian aviation sector will fall back on the advance purchase program,” the IATA official said.  Aviation analysts too feel the situation will change one the peak season sets in.