The Telegraph
Wednesday , April 2 , 2014
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Fly-for-rupee offer runs into air pocket

New Delhi, April 1: Low-cost carrier SpiceJet, which today unveiled tickets worth Re 1, was asked to immediately stop the offer by civil aviation regulator DGCA, which said it was deceiving travellers since only one or two such tickets were available on each flight.

SpiceJet had not revealed the number of discounted seats on offer under the scheme, which invited bookings by April 3 for domestic travel between July 1, 2014, and March 28, 2015.

A passenger would have had to pay all statutory taxes, such as airport departure tax, on top of the Re 1 fare.

Within hours, travel websites said the Re 1 tickets had sold out, raising questions about the number offered in the first place.

“The Re 1 fares have been sold out; customers can still get some very good deals if they book within the next couple of days,” said Rajesh Magow, co-founder and CEO-India, MakeMyTrip.

The offer ensured that traffic to websites selling SpiceJet tickets increased sixfold.

The DGCA sent a letter asking the airline to stop the offer, which it described as “predatory” and amounting to “malpractice” under Rule 135 of the Aircraft Rules relating to tariff, officials said.

“The fact that only one or two seats were being offered on each flight at the rate of Re 1 amounted to deceiving the travelling public,” a DGCA official said.

Late in the evening, SpiceJet issued a media release saying it had responded to the DGCA letter. “In all of our advertisements for this sale, we clearly state that fares were starting at Re 1/- (inclusive of fuel surcharge), and that seats were limited,” it said.

SpiceJet argued its pricing was not predatory. “It is with the intent to stimulate demand, and is not intended to reduce or eliminate competition,” it said, adding that such market stimulation was a key part of the low-cost airlines’ strategy.

The “fly-for-a-rupee” scheme was started by Air Deccan, which was taken over in 2007 by the now-defunct Kingfisher Airlines.

Analysts said such schemes do not amount to any real giveaways by the airlines because the seats sold on heavy discounts would probably have gone unsold anyway.

“Most routes see 60-70 per cent occupancy, which means the rest remain empty... so it does not cost an airline money to let someone fly even free of cost if the passenger agrees to pay all taxes and other charges,” said Debasish Chatterjee, director of CTI Travels.

In 2011, SpiceJet and Indigo were locked in a bruising price war that prompted airlines like Jet Airways and Kingfisher to approach the DGCA and demand curbs on predatory pricing, which were brought in the form of guidelines.

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