NEW DELHI – The early travel planner pays less for the aircraft seat. That’s what most airlines tell you with slogans like ‘the earlier you book your air ticket the cheaper deal you get’.
Well the truth is that you can get a cheaper deal if you are a last-minute passenger! As per market researcher PhoCusWright’s report, low-cost carriers (LCCs) in India are not following the traditional air yield management model which follows the principle of ‘the earlier you buy, the cheaper fare you get’.
Around 70% of LCCs capacity is sold in last three days of the departure, making India a unique market where the air yield management systems have failed. The airlines maintain that the dynamic pricing is followed, but owing to overcapacity in the domestic market and consumer behaviour, the yield management systems do not confirm to global standards.
“Owing to the competitive nature of the market and excess supply on metro routes, LCCs have not been able to follow the traditional air yield management systems. Also, in India most travellers are last minute passengers and airlines don’t want to lose them by offering higher fares. This does not hold true for domestic full service airlines as 70% of their passengers are corporate clients,” said PhoCusWright senior analyst Ram Badrinath.
“In last two years, the booking curve has shortened, as owing to high capacity not many passengers book their tickets too much in advance. Consumers are getting smarter and know that even three days before the departure they can get a good deal. This in turn is not good for the airline which does not get the cash in advance,” said SpiceJet marketing and planning VP Kamal Hingorani. SpiceJet has around 50% bookings only in the last seven days of the flight for metro routes.
GoAir MD Jeh Wadia, however, said his airline follows the golden rule of low fare airlines that is ‘the fare is never cheaper tomorrow’. Also that the number of bookings made at the 11th hour is merely 1.3% of GoAir’s total volumes, though he agreed to some extent that Indians are last-minute travellers. “Today, the average booking on a train is made two months in advance. This is done not to get a cheaper fare but to get a confirmed seat. Indians have never experienced a situation where buying early means paying less and therefore it does take time for the passenger to understand this,” he said.
Industry analysts believe the domestic market is overcrowded with players and even if one player follows a different market tactic, others have to follow. “Indian Airlines offers attractive last minute fares, influencing practises of other airlines,” said an airline official. ”As long as competitive pressures remain, airlines will do all that they can to fill even the last seat with a passenger,” added Mr Badrinath.
In case of leisure destinations, such as Goa, majority bookings are made 30 days in advance. But the overcrowded metro routes are giving yield managers a tough time.