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Fly Delhi-Mumbai for Rs 500
BS Corporate Bureau in New Delhi |
July 06, 2004 08:17 IST
This could be the mother of all price wars. Deccan Aviation, India's first no-frills carrier, will offer tickets for as little as Rs 500 on the Delhi-Mumbai route once it starts flying on this sector later in the month.
"We will be offering various price bands and the lowest ticket price in this sector will be Rs 500," said GR Gopinath, deputy chairman, Deccan Aviation, speaking at a two-day symposium on low-cost airlines in New Delhi on Minday.
The Delhi-Mumbai operations are expected to start between July 16 and July 23.
At Rs 500, a Delhi-Mumbai ticket would be less than 10 per cent of the existing economy airfare of Rs 6,445 and very close to the Rs 421 second-class Delhi-Mumbai railway ticket.
In other sectors, Air Deccan's services are about 50 per cent lower than the normal full-service operator, though in no sector does it offer tickets at less than Rs 990.
According to aviation experts, since Air Deccan will offer only 25 per cent of the seats for Rs 500 and scale up the price of the remaining seats, the average per seat realisation will come to around 50 per cent of the realisation for a full-service airline. The world over, low cost carriers operate at about half the costs of a full-service airline.
Gopinath refused to disclose how many seats would be booked at this price, though he said prices could go up to 75-80 per cent of the existing fare. He said the final plans of the pricing strategy were being worked out.
"We have a very low-cost structure. There will be certain number of seats with such low fares. Of the total seats, about 25 per cent will have rates which are very low and another 25 per cent will be priced at less than 50 per cent of the existing fare. The remaining seats will be about 75-80 per cent lower than the existing rates," he added.
Air Deccan's entry in the busy Delhi-Mumbai sector is expected to kickstart a price war. This has already happened in sectors where Deccan has started its services.
Industry experts say it is possible for a no-frills carrier to operate at such a low fare. "Globally, airlines do offer such low fares. They achieve this by operating on a really lower cost structure. Moreover, the number of such seats will be limited," said Kapil Kaul, senior vice-president (India), Centre for Asia Pacific Aviation.
Air Deccan is raising $60-100 million to fund its growth plans. The airline is expected to offer 20-30 per cent equity to investors for this purpose.
"We are adding new routes as well as acquiring new aircraft. The fund will be utilised for that," Gopinath said. The airline, with a paid up equity of Rs 30 crore (Rs 300 million), has a debt component of Rs 70 crore (Rs 700 million) on its books.
NM Rothschild has been appointed global advisor for the exercise, which is expected to be completed by the end of the current financial year.