Less than a week ago the Union Minister of Civil Aviation Mr. Ajit Singh asked Air India to submit a plan to enhance its share in the domestic passenger market, with the ultimate goal of being number one. This desire, against a continuing decline in domestic air passenger numbers. In August only 4.369 million passengers travelled, down 4% from the 4.537 million of July, thanks to surging airfares and a slowing economy.
Jet Airways (down 1.4%) and Kingfisher (down 0.3%) were double hit, as more passengers shifted towards the low fare carriers IndiGo, SpiceJet and GoAir, but Air India kept its market share steady; an decent performance for a full fare carrier, in these trying times.
Mr. Ajit Singh asked Air India to come out with innovative and customer focused strategies to achieve optimum utilisation of all planes and also maximum utilisation of each plane, but it appears the folks at Air India seem to know only one way to increase market share, a method on which, my fellow analyst, Vinay Bhaskara, made a telling comment
“Once the chase for market share commences, industry-wide bankruptcy looms”
Yes, you guessed right dear readers; to meet the minister’s “wishes” Air India has unleashed a fare war to gain market share. It promptly dropped its 30 day advance purchase fares by 15%. The very next day, the country’s largest private full service carrier, Jet Airways, followed suit with fare drops on 30 day and 21 day advance purchase APEX fares. Yesterday, other Indian carriers, including, IndiGo and SpiceJet have joined the fare slashing party.
Yet, this is no fun party. These airlines, for all practical purposes, are eating their young to survive. In this war of attrition, everyone is going to be the loser. As passengers we maybe getting a good deal in the short term, but in the long term, it will be us passengers, who will have to make good the losses of the airlines by paying higher fares.
Additionally, as tax-payers, our tax Rupees are being forcibly wrested to infuse Air India with an unlimited lifeline, and if anything, the carrier, and its political masters, have a moral obligation to be more careful and judicious in the use, some may say, waste, of our money.
Surely a well educated Ajit Singh, an alumnus of the prestigious I.I.T. Kharagpur and Illinois Institute of Technology, Chicago, realises what his well intentioned comments are resulting in, and reigns in this disastrous fare ware before it gets out of hand.
What are your thoughts on this situation? Please share a comment.