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IndiGo announces Re1 fare to take on AirAsia India

LiveMint logoLiveMint 31-05-2014 PR Sanjai

Mumbai: Triggering a fare war, India’s largest airline by passengers carried IndiGo, run by InterGlobe Aviation Ltd, on Saturday, announced promotional fares for just Re1 on Bangalore, Chennai and Goa routes in reply to AirAsia India’s Rs5 offer.

On Friday, AirAsia (India) Pvt. Ltd had launched rock-bottom air fare of Rs5 (excluding airport tax and other applicable fees), with over 15,000 promotional seats available for immediate booking.

“The no.1 airline brings you the lowest of low fares. Fly from BLR to MAA & GOI for just Re 1!,” IndiGo wrote in microblogging site, Twitter.

MAA refers to airport code of Chennai, BLR stands for Bangalore and GOI is Goa.

However IndiGo did not say how much seats are available for Re1 offer.

AirAsia India is starting its flights from 12 June and the promotional fares are available on flights from Bangalore to Chennai, Chennai to Bangalore, Bangalore to Goa and Goa to Bangalore.

On Saturday, Mittu Chandilya, chief executive officer of AirAsia India he is adding 10000 seat for Rs5 promotional seats.

“Received overwhelming response to our Goa and Chennai routes. I have decided to have additional Rs5 promo fares!,” Chandillya wrote in mirco blogging site, Twitter.

Passengers will be able to book on the company’s website from 30 May to 1 June, for travel between 12 June and 25 October 2014, the company said.

“We chose Bangalore, Goa and Chennai as our first destinations looking at the market that aligns with our low-cost business model. I’ve promised that AirAsia India will make quality travel affordable to all and that we will revolutionise the Indian aviation sector,” Chandilya said in a statement on Friday.

AirAsia India is a venture of Malaysia’s AirAsia, Tata Sons Ltd and Arun Bhatia of Telestra Tradeplace Pvt. Ltd.

SpiceJet Ltd is also offering discounted fares of Rs1,499, excluding statutory fees, for flyers planning a trip on the Bangalore-Goa and Bangalore-Chennai routes for travel dates from 12 June.

In April, in an unprecedented move, India’s aviation regulator had asked budget airline SpiceJet to stop offering cheap fares to passengers, calling it a malpractice that may harm the industry, drawing flak from an air passengers’ association.

The directive by the Directorate General of Civil Aviation (DGCA) came after SpiceJet launched a sale on the lines of the erstwhile Air Deccan for the first time in seven years, allowing passengers to book seats on its routes for prices ranging from Rs1 to Rs1,499.

Mint could not immediately contact DGCA for a comment.

Kapil Kaul, chief executive officer (south Asia) at consultancy firm Centre Asia Pacific Aviation, or Capa, said competition will be aggressive and Indian airlines have a track record of engaging in unsustainable fare discounting and an unusual willingness to bear losses.

“AirAsia may have unde estimated the capacity of Indian carriers to pursue irrational pricing. AirAsia India has generated media attention by claiming that it will offer fares 30% lower than the competition. Competitors will greet AirAsia’s entry with tactical fares intended to erode any price advantage that they may seek to offer and with the intention of presenting the 30% differential as a myth,” Kaul said.

He said the intense competition will increase financial challenges for all operators and place great pressure on some of the incumbent airlines which are struggling, and whose holding power may be tested.

Jet Airways (India) Ltd and SpiceJet posted record losses in FY2014 and the industry as a whole is expected to report a full year loss of approximately $1.5 billion.

“Some carriers are in a precarious state, with cash balances equivalent to less than one day’s revenue,” Kaul added.

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