3 secret reasons why Indian airlines offer flash sales

Flash sales have been the best way to attract customers. Aviation is no different.

Think of it, if an airlines offers you flight tickets at half the price, would you let it pass? No one will.

This March Singapore Airlines launched a spring sale for flights to Australia from London and Manchester for travel before 31 May 2015. We Indians are not far behind.

India has been the Disneyland for these outrageous offers. First it was Spicejet with its ‘Lower than Train’ fares, and that led to a chain of discounted fares by Indigo, Air India, and several others. The latest is Jet Airways with its ‘Million Sale’.

The naïve question now is why are these airlines offering discounted fares amidst rising costs and thinning profit margins?
Surely the condition of Indian civil aviation is nowhere as good as its global counterparts.

Business Insider India decodes the rationale behind these outrageous discounts.

Here are the top 3 reasons Indian airlines offer discounts:

1. Booking ahead of time: It’s a wonderful proposition to book seats to capacity for upcoming months. No airline wants its flights to fly vacant. It’s important to note most would never offer all its seats on sale.

2. Cash flow management: It’s all about having the money in hand. Like they say, a rupee today is worth more than a rupee tomorrow. However, on the flipside repeated sales build an unstable ecosystem.

“One can’t sustain this long term from a business perspective. It’s fine on a one time basis so that one doesn’t lose customers”, Dhiraj Mathur, Leader, Aerospace and Defence practice, PwC India says.

3. Retaining Market share: There’s a lot of competition in the market today. In such a scenario, airlines are fighting tooth and nail to grab passengers. So while one airline offers a sale, the other doesn’t want to be left behind. However, one must remember global profit margins are hardly 2-3%, no more than that.

Indian flyers are all for ‘value for money’. If flight ticket prices are high, they’d rather take the train. However, the resultant price brawl may not necessarily yield much in return.

“Nobody wants to lose out. But when everybody starts discounting tickets, everybody loses. It’s a race to the bottom”, Mathur says.

Spicejet recently posted a Rs. 22.5 crore profit for the fourth quarter ending March 31, 2014. Its stocks have jumped 12% today. This is a far cry from the last seven consecutive loss-making quarters. Many believe with clever cost-cutting and a tight operations plan, there’s still hope that Indian aviation will see better days.

(Image credit: Indiatimes)