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India airlines offer facilities to take on Air Asia
Publication Date : 20-08-2013
The aviation industry appears to be bracing up for the competition likely to be offered by Air Asia India, the launch of which is expected to take place by the end of this year.
While Jet Airways recently put on sale seven lakh tickets at a competitive price, Spicejet yesterday announced a host of facilities like empty seat option (ESO) and flexibility reward option (FRO) among others in a bid to retain its customer base.
Spicejet, which soft-launched the facilities around two weeks ago, formally launched them in the Capital today. It will allow customers the option of having the adjacent seats empty at a reasonable price of 250 rupees (US$3).
A Spicejet official said no data is available to show how the facilities have been received by customers or how many customers have availed the facilities till now. “That analysis has not been done now,” said the official. However, he said the airline is the first domestic carrier to offer the ESO facility.
The airline said the ESO facility is for those customers who require privacy or comfort for various reasons. Along with this, under the facility of FRO, the customer will get a compensation of 1,500 rupees from the airline if he or she allows the airline to change the day and time of the flight in case it is overbooked.
For offering this facility, the airline has tied up with a software firm Optiontown. The CEO of Optiontown, Sachin Goel, said the firm has partnered with 12 airlines worldwide, including Air Asia and Malaysia Airlines, to offer these facilities.
The facilities, according to Goel, will lead to an increase in ancillary revenue of the airline from the unused economy seats using the current customer base.
According to airline officials, 20 per cent of the seats in the economy class remain vacant. These seats will be used by the airline to offer ESO. “The load factor of the airlines is generally 80 per cent,” said Goel.
V Raja, vice president of Spicejet, said offering these facilities would not require the approval of the directorate general of Civil Aviation. “It is not unbundling of services. We are just selling a product to enhance the comfort of the customer. Moreover, the facilities are being offered post-sale,” said Raja.
What seems to have prompted SpiceJet to take the decision to launch these services is the imminent launch of Air Asia India, a joint venture between Malaysian low-cost carrier AirAsia and India’s Tata Group.
The domestic airlines are also wary of a price war that might follow as Air Asia is known worldwide for airfares which are “as low as taxi fares”.
Also, in an economic scenario where the rupee is fast depreciating, the aviation industry is now hard-pressed to offer facilities which will increase their revenue and does not undercut their customer base at the same time. For various purposes including maintenance, repair and overhaul of the aircraft, which is generally carried out at overseas locations, the airlines require foreign exchange.
SpiceJet is certainly wary of the fact that there is a new entrant while it already has many competitors on the turf.
At the moment, it carries around 17 per cent of the total domestic flyers in India. SpiceJet will now be more constrained to retain its customer base.
At the same time, at a moment when all the domestic airlines are wooing foreign airlines for FDI after the Union government allowed 49 per cent investment by a foreign airline in a domestic airline, Spicejet would not let its financials go out of shape.
Low-cost carrier Spicejet is understood to have held talks with a Middle East-based airline for foreign direct investment.