SpiceJet and Others Restructure Pricing Scheme To Ensnare Customers

Tuesday, 20th May 2014 at 07:20am

Local carriers in the country are in a frantic mood to keep their loyal customers, and entice even more customers, by restructuring their pricing strategy in anticipation of the nearing official launch of AirAsia India.

The price restructuring is aimed at keeping or increasing their market share in the country whose commercial aviation industry have been in doldrums due to low demand and high operating costs, causing airlines to pile up losses and accumulate debts.

SpiceJet, for instance, led other carriers to implement the new scheme by holding a series of flash promos more often this year than it normally would in the past. In previous years, most carriers held ticket sales 2-3 times over in a year.

The drastic move by the carriers to change their strategy is triggered by the looming of a competitor that is seen to change the way people travel in India.

AirAsia Bhd. promised early that it will offer local travelers the opportunity to experience the best in budget travel without costing them their arms and legs.

Over one week earlier, AirAsia India received their air operator's permit, paving the way to start their commercial operations.

The prospect of having a stiffer competition ahead causes existing airlines in India to devise a new business strategy to keep their captive market or expand their client base. The fear that the new start-up will eat into their current share is so intense that they strongly oppose the granting of a license to AirAsia India, citing legal violations that they believe the airline had committed. As a result, they banded together and filed a case against the airline which is now docketed in the high court.

The strategic pricing scheme allows SpiceJet and other carriers to offer customers advance bookings months ahead enabling them to ensnare prospective customers who are lured to cheap fares. Based on a travel portal's data, advance bookings surged by up to 300% during flash sales and advance purchases skyrocketed to as much as 800%.

In January of this year, SpiceJet initiated a flash sale offering tickets half their regular price which triggered a sales frenzy by other carriers as a result. For the first time in its history, SpiceJet offered a Rs1 base fare promo, something that the country has never seen before, prompting the aviation regulator to call it a 'predatory pricing'.

According to local airline executives, the change in strategy was reportedly neither born out of their fear of AirAsia India's formal launch, nor do they pattern it after AirAsia's business model�"or so they claimed.

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