Airline companies pour discounts ahead of lean season

Airlines have slashed their fares across the routes to fill their planes ahead of the lean season that starts at the end of this month. Airfares are higher if they are booked for travel in the same week or the week after, but much lower when booked in advance. The July to August quarter is usually a lean season for airlines after a packed April-June quarter which sees high traffic due to summer vacations in schools.

IndiGo has announced that the discount sale will be open from 12 June to 14 June. Indigo is offering all-inclusive prices starting at Rs 899 on select routes, including Mumbai-Goa, Jammu-Amritsar, Delhi-Udaipur, Ahmedabad-Mumbai, Chennai-Port Blair, Hyderabad-Mumbai, Kolkata-Agartala, Delhi-Coimbatore and Goa-Chennai. Go Air too is offering tickets for similar prices. Even Jet Airways announced a sale, offering tickets at Rs 1,111 for travel between 27 June and 20 September.

The fares on popular routes like Delhi-Mumbai, which are currently selling at prices up to Rs 7,000 this week, are expected to go down to Rs 2,100 in July. This is due to the lean July-August period, which sees a fall in traffic because of monsoons and the end of summer holidays. According to data from Directorate General of Civil Aviation, growing competition among airlines to offer attractive fares to flyers has augmented the growth in air travel in India.

An increase in crude oil prices increases the airline industry’s largest input cost, so volatility in oil markets poses a risk for the airlines. While weakening crude oil prices enhance profits, they can also lead to lower airfares, spurring demand for travel and pushing airlines to increase capacity. If airlines add too many routes or expand their fleet, it can erode their profitability when oil prices recover. Airlines are trying to maintain the right balance between adding capacity, reaping the benefit of cheaper fuel and holding the line on passenger yields.

India's domestic air passengers grew 15.2% YoY to 9.1 million in April 2017. Passenger growth has been in double digits for the last 33 months. The domestic load factor stood at 85.5% (v/s 81.8% in March, 85.7% in 4QFY17).