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GoAir_320

When GoAir announced yesterday its intention to offer 17 lakh (1.7 Million) seats for sale for the travel period between Jan 01, 2015 and March 31st 2015, there was something misleading, yet not dishonest about the advertisement.

The advertisement, ‘Winter Offer – 17,00,000 air tickets for travel from January 1 to March 31, 2015 – Fares Rs. 1,469* onwards. Book now!‘, projected the offer as a large volume sale, perhaps on the lines of SpiceJet’s, during the latter’s better days.

The result? The ‘Winter Offer’ attracted many visitors to its website, making the website slow, unresponsive, and at times – not load at all. But the attention it gathered was based on perhaps a misleading wording of the offer.

Go Air is a small sized, Airbus A320 operator. Each aircraft flies just 176 seats, as four middle seats in the first two rows are left vacant as part of the Go Business offering. This airline flies to 22 destinations, on mostly mature routes which the airline claims are ‘profitable’ (in reality, profitable for the capacity of the aircraft). On average, the airline flies 128 flights a day – all domestic – and carries some 20,000 passengers a day. 20,000 passengers translate to 18 lakh (1.8 Million) passengers across three months.

On a lean season to lean season basis, GoAir’s capacity has grown 15%. Based on this, this year’s Q4 FY2014-15 : January, February & March – the period of travel for the ‘Winter Offer’ – may fly close to 21 lakh (2.1 Million) seats, of which 5.8lakh (0.58 Million) seats are expected to fly empty in the absence of a market stimulation.

In short, GoAir offers a sale of ‘17,00,000 air tickets ‘ when the airline can fly a maximum of only 21,00,000 seats, making the number of tickets up for grabs 81% of the expected capacity to be deployed, while only 5,80,000 seats (27% of the expected capacity to be deployed) are expected to fly empty in the Q4 lean season. It’s these empty seats that an airline usually tries to fill via an offer or discount.

The real, discount offers may be available for a maximum of around 5,80,000 seats, while the remaining seats may sell at close to the regular fares, as it still falls under the bracket of ‘Fares Rs. 1,469* onwards‘.

We expect only about 35-40% of the 17 lakh seats to sell abnormally fast in this offer period, as these may represent seats that are priced lower than regular fares. The balance 60% may not witness an abnormal purchase rate, and a large portion may remain unpicked. In the event that the 35-40% target is not met, the airline may perhaps come out with another offer to sell excess inventory in advance. In this sale, the airline has withheld ~20% of its capacity (4 lakh seats), which correspond to about 35 seats a flight, which may include both pre-sold seats as well as seats which may be bought in the last one to two weeks of travel, at high prices. Of these, 8 seats per flight are Go Business, which are priced at between 1.5 – 3 times the regular fares.

The five day sale window is abnormally close to the travel period which starts as soon as six days later – a debatable decision.

GoAir chief executive Giorgio De Roni told PTI ,”The January-March quarter is traditionally a lean quarter… The purpose of introducing these fares is to make air travel affordable during the period”. That statement has proved to be very interesting, considering that in the lean season airfares are usually lower, as capacity is higher than demand. The only time airfares rise is when carriers sell their excess inventory early, thereby not putting any pressure on the pricing as the date of travel approaches.

The best way to read the offer is by separating, “17,00,000 air tickets for travel from January 1 to March 31, 2015” and “Fares Rs. 1,469* onwards. Book now!”.

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