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Blog Update: Thoughts on Sale & impact of LF in Septembe

 
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ameya
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Joined: 09 May 2007
Posts: 3584
Location: Pune,Maharashtra

PostPosted: Tue Oct 21, 2014 2:28 pm    Post subject: Blog Update: Thoughts on Sale & impact of LF in Septembe Reply with quote

Summarizing the frequent sale at Spicejet and looking back on how many times they understold the inventory to fill up aircraft in September

Blog Link
Chart showing the sale period and price, available only on the blog link. THe rest is here.


As reports started trickling in that the Indian market has grown 27.8% MoM, people were astonished to know that data is for September, traditionally a lean month for travel in India. The entire industry, tends to work on two good quarters – Q1, covering the school holidays and Q3, covering the Diwali & X’mas holidays, while the other two Q2 & Q4 are traditionally bad because only business travelers fly and less people tend to fly for leisure.

Overall, all airlines in India have improved on OTP, with the lowest being 75%+ but IndiGo continues to outperform at 90%. Spicejet has not been able to keep up the momentum of Dec – Feb period and that is more to do with the fact that IndiGo was heavily impacted by the winter / fog, where as Spicejet has much lesser operations at such stations. Once the weather turned good, it was difficult for all airlines to catch up with IndiGo. However, the point of discussion has now shifted from OTP to Load Factor.

This growth is an indication of how the Indian market reacts, and a vindication that people fly more only when fares are cheap. At these fares, seats are filled up but airlines struggle to make money, but at higher fares, seats are empty, yet the revenue may be better. I am no expert in Revenue Management and only results of airlines for this quarter will let us know the financial position of two listed airlines – Spicejet & Jetairways, who had some difficult questions to answer when numbers were reported for last year.

Spicejet topped the load factor chart with 85.9%, which was followed by Jetlite at 82.7 and Go Air at 82.3. Jetlite which primarily operates on monopoly routes or duopoly ones seems to be doing bad on few of its flights on the metro segments. Market leader IndiGo was at modest 77.9 percent.

The Load Factor of Air Asia India, was a far cry from the tall claims by the airline of being full for the first few months of operations. With claims of profitability, sold out flights and much more, Air Asia clocked the lowest Load Factor of 68.7%. Air Costa on the other hand, has been able to consolidate and increase Load Factors, more because only two aircraft were in operation for majority of the period.

With a lot of discussion, justification, counter points coming up about the market simulation by Spicejet, let me throw some light on the sale / offers which were launched by this airline. There were no less than 5 times that a sale was announced for tickets in September and all of them had competitive cut throat pricing.

This has certainly helped in shoring up loads but has it helped in making money? We would know this only when Spicejet announced the results of Q2.


The month to look out for would be December, where IndiGo has in the past had load factor of 90%+ and all others have found it difficult to match that. However, with numerous sales by Spicejet in the past selling tickets for December, this year could be different.
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sumantra
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PostPosted: Tue Oct 21, 2014 5:36 pm    Post subject: Reply with quote

Lovely analysis, Sir. Thanks for keeping us abreast of all this!
Cheers, Sumantra.
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ameya
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Joined: 09 May 2007
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Location: Pune,Maharashtra

PostPosted: Tue Oct 21, 2014 10:10 pm    Post subject: Reply with quote

sumantra wrote:
Lovely analysis, Sir. Thanks for keeping us abreast of all this!
Cheers, Sumantra.


Welcome ! I was maintaining this excel sheet for sometime . . made good use of it when I felt like writing about this today
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