Companies & Sectors
Price war in the air: Travellers win for the time being!

Considering the high fare structure applicable today among airlines in India, even this short period given for slashed and discounted rates would bring some relief for many passengers

In a startling move, SpiceJet fired the first salvo in the aviation price war, by reducing its rates by offering a whopping 50% discount, on base fares, for three days, to facilitate booking by air travellers. This is provided the booking is made 30 days prior to actual travel!


It did not take too long for others to react! IndiGo and GoAir promptly responded with similar discount on their fares. Not to be outdone, Air India followed suit that would open its counters for booking on Wednesday, but the travel to be completed by 15th April. We must remember that all those flying to the east coast of US face serious snow problems and European market has an automatic repercussion on such drastic change in passenger traffic. Until the snow situation becomes safe, it may be ideal to purchase available tickets.


In any case, the discounted fares on all these airlines are available only for a limited number of seats, details of which have not been made public. Considering the high fare structure applicable today, even this short period given for slashed and discounted rates would bring some relief for many.


Last year, in January, SpiceJet had offered a million seats at a flat fixed price of Rs2,013, which had an overwhelming response, though they had not stated the number of seats offered at that time.


In the present instance, SL Narayanan, group chief financial officer, Sun Group, which owns the SpiceJet, stated that the pricing was done "to improve utilisation so that revenue is optimised". The most dangerous thing for an airline is to have empty seats and less cargo than it can carry on each flight! During a lean period, such sales gimmicks help both the airline and regular passengers. The response to this offer has been "superb" according to Narayanan.


In order to support the effort of the aviation sector, whether, for the time being, the airport operators will give special reduction in their charges is not known, but it may be a good idea for them to do so. It will mutually benefit both.


As this aviation price war is in full swing, efforts are underway for Air Asia

to launch its operation in the next couple of months. As we all know, this is another low fare airline, which was to have taken off in December 2013, but did not do so, for want of air operating permit (AOP). In our earlier report on this story, Moneylife had pointed out the optimistic attitude of this airline, and their hope to get AOP couple of months ago. It is now learnt that the Director General of Civil Aviation (DGCA) has just issued a public notice only on 20th January, seeking the "feedback" to be submitted in twenty days from the public notice, from public and "all persons likely to be affected by the grant of AOP" to the airline. What they were doing so long, or what was the reason for them to make this public now, is a question that needs to be answered—by them!


Air Asia India has a no objection certificate (NOC) from the Ministry of Civil Aviation and approval from Foreign Investment Promotion Board (FIPB) already. The delay in issue of AOP, for whatever reasons, will only mean that the actual launch of Air Asia India may have to be further delayed, though its management has shown serious interest in recruitment, training programmes, related work on flight and ground operations, besides arranging for required technical and engineering services.


Regrettably, we all know the unpredictability and lack of transparency in India’s regulatory government work. They work at their own pace. While noting the reduced fare structure from SpiceJet, IndiGo, GoAir and Air India, regular travellers may also bear in mind that, if and when Air Asia gets the required clearance to operate its flights, it will initially cover, with Chennai as its hub (base), flights will cover Bangalore, Trichy, Coimbatore, Kochi, Hyderabad, Goa, Ahmedabad, Jaipur and Pune. It is hoped that their fares will be competitive and service excellent.


Finallly, according to the data available from Director General of Civil Aviation,

air traffic in India has registered a 4.43% growth in 2013 leading to the scheduled airlines carrying 61.42 million passengers, compared to 58.81 million in 2012 and 60.66 million in 2011. No doubt, with the reduced, discounted fares offered by the four airlines, even if for a short period, will boost the full utilisation of space and all these airlines will enjoy full loads and occupancy. One other constraint was the impact of the fall in the rupee against the dollar, having recorded a low of Rs68.15 at one time and recovering to Rs61.50 recently.


Now the question for the investor is whether such sales gimmicks will affect the overall profitability of the company or not?


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)


RBI to withdraw all pre-2005 currency notes from circulation

Anyone can easily distinguish rupee notes issued before 2005 as they do not have the year of printing on reverse side, which is visible for notes printed after 2005 in a small font at the middle of the bottom row in notes

The Reserve Bank of India (RBI) has decided to withdraw all currency notes issued prior to 2005, including Rs500 and Rs1,000 denominations, from 31st March. This move is apparently aimed at curbing black money and fake currencies.


In an advisory, the RBI said, "After 31 March 2014, it (RBI) will completely withdraw from circulation all bank notes issued prior to 2005. From 1 April 2014, the public will be required to approach banks for exchanging these notes".


The public can easily distinguish the currency notes issued before 2005 as they do not have the year of printing on reverse side. The year of printing in a small font is visible at the middle of the bottom row in notes issued after 2005.



Asking people not to panic and cooperate in the withdrawal process, the RBI said old notes will continue to be legal and can be exchanged in any bank after 1st April.


"From 1 April 2014, the public will be required to approach banks for exchanging these notes. Banks will provide exchange facility for these notes until further communication," it said.


From 1 July 2014, persons seeking exchange of more than 10 pieces of Rs500 and Rs1,000 notes will have to furnish proof of identity and residence to the bank.


Although the RBI did not give any reason for withdrawal of pre-2005 currency notes, the move is expected to unearth black money held in cash.


As the new currency notes have added security features, they would help in curbing the menace of fake currency.


At present, currency notes in denominations of Rs5, Rs10, Rs20, Rs50, Rs100, Rs500 and Rs1,000 are issued.



Dr Anantha K Ramdas

3 years ago

I sincerely trust this is the first step towards replacing our paper currency with polymer notes.

As very correctly pointed out by Mr Hemant, there is NO need to replace lower deonomination notes; preferably, the RBI should start with Rs 1000 and Rs 500, and once the bulk is withdrawn, they may consider
Rs 100. Lower denominations have truly no consequence in the "fake" currency area, as the counterfeiters would rather spend their time "perfecting" to make higher deonominations. After all, they are are aided by Government experts in Pakistan from where these have been coming for sometime, and Moneylife has covered this aspect in several articles in the last few months.

What RBI needs to do is to atleast clarify their views and plans on the polymer notes, which they actually test marketed in a few selected cities 8/9 months ago. Better still, they need to identify the name of the officer to whom we may raise our views on the subject.

If, in this way, black money can be taken out,it is atleast a good step in the right direction, and we must appreciate this intelligent move by RBI.


3 years ago

What is the rational in cancelling notes below 100 Rs denomination ?


3 years ago

If the move by RBI is "apparently aimed at curbing black money and fake currencies." then why is so much advance notice being given? All the pre- 2005 notes will now be pushed into circulation!

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