IndiGo to keep fares low despite fall in net

IndiGo, India’s largest airline, sounded alarm over low fares. The airline, however, vowed to keep discounting fares amid an expanding price war, which resulted its net profit to fall by ~3,227 million in the fourth quarter sales.

IndiGo will continue fighting competition with cheap tickets across network despite the short-term pain, Chief Financial Officer Rohit Philip told investors on Wednesday. “These fare levels at current fuel price are not sustainable, but we will continue matching the competition,” he said.

A combination of low fares, creeping fuel price and a fluctuating exchange rate saw the airline report a drop of 73 per cent in net profit to ~1,176 million as compared to ~4,403 million in the corresponding period last year. “The trend is more visible during the window of 0-15 days impacting our yields,” Philip said. Airlines normally price their seats higher near closer to the date of travel.

“Attempts to build advance base loads are not working anymore, as passengers now expect fares to drop close to the date of travel. As a result, a virtual bank run happens close to departure, as all airlines try to dump excess seats at steep discounts, given the less-than-normal advance buildup. Also, there is no incentive for passengers buying tickets,” an executive of a different airline said.

A survey by travel portal Cleartrip.com showed that fares were at least 30 per cent lower this year even during April-end, which is normally a peak season for airlines due to beginning of the summer vacations and encourages airlines to raise fares.