SpiceJet has been at the receiving end of undue attention from the Indian regulator for civil aviation (DGCA) for a while now. Last month, DGCA pulled them up for a little song and dance on their planes for celebrating Holi. Although the charges such as “The frequent movement of the dancing crew may have affected the aircraft’s centre of gravity during flight and created turbulence” were frivolous, DGCA stuck it out till it made the airline bend and commit that they’d ask for permissions before doing a similar thing in the future.
Yesterday, I wrote about the SpiceJet sale for INR 1 tickets. While I could not locate tickets suiting my travel plans, many a folks did manage to secure tickets to go where they wanted to go, including two friends who are going to Goa for INR 650 each. The airline had amply clarified that only limited tickets were available at the INR 1 price, and a few more tickets were available at INR 799 and then some at INR 1499.
However, the DGCA seems to have again taken offence to this airline, and yesterday asked them to withdraw the sale. Their assessment is that this sale is a predatory practice, and a malpractice. A quote from the letter of DGCA, as reviewed by the Mint:
Gupta argued that the DGCA rules say “every air transport undertaking” shall “establish tariff having regard to all relevant factors including cost of operation, characteristics of service, reasonable profit and the generally prevailing tariff.” Selling cheap seats amounts to a malpractice, Gupta wrote.
“This is clearly an attempt to deceive the travelling public and comes under the category of malpractices which will distort the civil aviation market,” he wrote.
Yawn, my reaction. I think there is no regulation in India which says there has to be a certain price to a seat, and revenue management is clearly a commercial function of the airline, not for the regulator. Also, the same low-fare carriers will be selling the remaining seats on high density sectors at far higher prices as dates close in. Clearly the regulator does not know what they are talking about. Last year, the regulator advised all the other airlines not to follow the SpiceJet INR 2013 sale, but that was different and I agreed with the regulator. In this case, no other carrier matched the fares downwards, so SpiceJet is the only one benefiting from this sale.
Also, Air Asia India is coming to India shortly, and they have all sorts of marketing plans to put people on their planes for very low fares, which is its global business model, and I don’t see how the same rules won’t apply to them.
SpiceJet, instead of cowing down, however, has continued with the sale. Their response was that with 20% marketshare in India’s domestic traffic, they clearly can’t be having pricing power to bring the house down. And while most of the INR 1 inventory is gone (it was 1.67% of their total inventory for these months), there are still deals to be had at the INR 799 and 1499 price points, and the sale is on for another 36 hours approximately.
- Spicejet offering INR 1 base fare flights till March 2015
- SpiceJet gets into trouble for celebrating Holi on the plane
- The economics of Spicejet’s fare sale and justifying the regulator’s action