AirAsia entry could intensify price war in domestic skies

The likely entry of AirAsia into the domestic market has got its main competitors – Indigo, SpiceJet, Air India and Jet Airways – bracing for a severe price war. While airline officials refused to talk on the record, off the record they said that every airline would have to take steps to protect market share. Many airline officials pointed to the changes in the Indian market scenario in the past few months after reports of AirAsia’s possible entry. In January, SpiceJet offered 10 lakh tickets at heavily discounted prices for travel during the lean season. Soon an all out price war broke out. Some, such as Jet Airways, made public announcements about the price cut, while Air India and IndiGo did this in a more subdued manner. With AirAsia’s emphasis on offering low fares, the existing airlines say they will have little choice but to match or offer lower fares to retain passengers. “No one likes competition. Each player is keen to increase his market share. If you have 25 per cent market share, would you not like to go to 40 per cent? A new player can spoil the chances of increasing the market player of an existing airline, as the market is not really expanding,” said an officer of a large domestic airline. His point is borne out by the figures provided by the Directorate General of Civil Aviation, which show that during calendar year 2012, the number of passengers carried by domestic airlines declined by three per cent at 5.88 crore, compared with 6.06 crore in 2011. Some in the industry, however, feel that the AirAsia’s entry could be a game changer. “The entire AirAsia model is based on inducting aircraft at a fast pace and expanding the number of flights on offer. Here the Government gives permission for aircraft import. And it cannot make a policy which allows easy import for one airline and not another,” said an officer working with a private airline. In the last few months, a Delhi-based low-cost airline has complained about Government delays in import of aircraft.

Source: Hindu Business Line

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