The year 2009 may have begun on a sombre note for some (Satyam and its boss Ramalinga Raju for one), but for air passengers, things are suddenly looking up.
It began with Singapore Airlines slashing economy fares by a staggering 52 per cent to Singapore and other south-east Asian destinations from India. A New Year promotion fare offered return tickets to Singapore for Rs 16,830 inclusive of all taxes. Thai Airways dropped fares on the Delhi-Bangkok and Delhi-Ho Chi Minh routes.
German carrier Lufthansa reduced fuel surcharges and British Airways dropped fares by 35 per cent on all its flights from India to London. Emirates is now offering tickets to passengers travelling to destinations like Dubai, London and New York from India with return economy-class airfares starting from as low as Rs 15,490, Rs 20,990 and Rs 39,990 respectively.
In other words, if you have any of these destinations on your list, this is the time to plan that trip.
But what's interesting is that despite no real change in the economics governing their industry, coinciding with the lean season, low fares on domestic sectors -- as promised by the airlines -- are suddenly back. The drop in fares, in many instances, is quite significant.
The drops seem even more dramatic when one looks at fares on offer by full-service airlines like Jet Airways, Indian and Kingfisher. A Jet Airways one-way ticket for Delhi-Bangalore on January 20 is available for Rs 4,500, including all taxes and surcharges. This is a massive drop from even December, when a Delhi-Bangalore one-way ticket booked many weeks in advance would cost upwards of Rs 8,000.
A visit to the Cleartrip website and you will see across-the-board drop in fares by Jet and other full-service airlines resulting in savings of almost Rs 3,000-4,000 on a return flight on many trunk routes.
The low-fare airlines have also reduced fares, although the drop isn't as dramatic (the fare gap between low-fare airlines and full-service airlines has lowered). An IndiGo flight to Mumbai from Delhi and back would cost around Rs 6,000, down from around Rs 11,000 in November 2008, a substantial fall by any indication. A ticket for January 14 from Delhi to Mumbai on SpiceJet was available for slightly less than Rs 3,000 (basic fares of Rs 95, Rs 99 and even Rs 9 are on offer).
In the last few weeks, airlines have been announcing that APEX (special fares for bookings 21 days later) is back. So, if things are looking better one week down the line, they may look even better three weeks down. The Delhi-Bangalore fare on Jet drops from Rs 4,500 to Rs 3,325, if you can plan your life a bit.
While the cut in fares is good news for passengers, I'm not sure if it is such good news for the airlines. At least one seasoned industry expert termed the fare drop as a "return to chaotic market conditions and irrational pricing." IndiGo's president Aditya Ghosh is quick to point out that ability to sell at low fares depends critically on a particular airline's cost structure and the fact that selling below cost -- as is now happening -- is unsustainable in the long run. To grow without diluting yields, high borrowings or huge unpaid bills is easier said than done.
Secondly, what if the cut in fares fails to stimulate demand? There was almost a 5 per cent drop in the total number of passengers flown in India in 2008, when compared with the year before -- the second half of the year took more of a hit than the first.
But what if that is not only on account of high fares?
Many carriers say that despite the revision (end of December), loads are yet to pick up. January 2009 loads are lower than even those in January 2008, despite fares now being lower. The market, many argue, was being stimulated by the younger fliers, whose propensity to save was lower. But with jobs at stake and income expectations for the year appearing to be low, loads may not pick up easily. In the current economic scenario, reduced prices may not generate enough additional traffic and revenues to even offset, leave alone exceed, the adverse impact of reduced yields. What happens then?
Industry analysts feel that there is no 'real' increase in the customer base in India and that the phenomenal growth in 2006 was partly due to Air Deccan that propelled many first-time fliers to take to the skies, which did not necessarily translate into repeats.
Moreover, the outlook for the year remains grim, regardless of what one may or may not do. The Centre for Asia Pacific Aviation's outlook for the year argues that domestic traffic for the 12 months ending March 31, 2009, may show a decline of as much as 10-12 per cent year-on-year and that the promotional pricing announced in January 2009 may only have a 'marginal impact as there continues to be a substantial margin between low-fare airline prices and second class air-conditioned rail travel.' IATA predicts losses of airlines in the Asia Pacific region going up in 2009, not coming down.
So, in the final analysis, I would say the fare drops are certainly real. Whether or not they will be sustained is harder to answer. So, probably the best thing to do is to enjoy it while it lasts and postpone any plans other than travel plans.
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