Business: Domestic Airlines: Price Warriors

Free holidays, complimentary stay in hotels, discounts and gifts. With a small airline sparking off a price war, there has never been a better time to fly.

Baijal says aggressive marketing is the key to upping profits

Garment exporter Gopal Raheja was a faithful Jet Airways passenger. Until rival Sahara Airlines seduced him with its latest offer. "I had never travelled Sahara before but it offered me a day's stay at a five-star hotel in Delhi, breakfast included," says Raheja, who didn't think too long before switching loyalties.

BAIJAL'S BONANZA

ť Buy a return ticket to Goa, get a four-day holiday.
ť Collect seven metro boarding passes, get an international ticket.
ť Buy a Delhi-Mumbai return, your spouse gets 50 per cent off.
ť Four-year low Delhi-Mumbai fare of Rs 3,800 for one month.
ť Plans tie-ups with jungle lodges in Karnataka. Co-branded credit card also on the anvil.

Jakarta-based businessman Yashroop Mal Lodha -- a regular Jet and Indian Airlines (IA) flier -- availed of the same offer. But unlike Raheja, who has decided to defect to Sahara, Lodha says he prefers his old airline. "As a package this is a good deal but Jet remains the best airline," he shrugs.

Both Raheja and Lodha are clear targets of Sahara's latest marketing blitz -- they are passengers of rival domestic airlines. The relatively tiny private airline jolted established players Jet and IA when it slashed ticket prices by up to 20 per cent beginning April and followed up the low rates with a hamper of freebies ranging from televisions, mixers and cell phones to the use of a six-door limousine for 12 hours.

"When we decided to reduce fares, we could not endlessly wait for the economy to pick up," says Kapil Kaul, Sahara's chief general manager, marketing and sales. "Jet and IA together have some nine million passengers. We thought we don't need to wait for the market to grow. That is the market." A prolonged economic slump has depressed domestic air traffic, which is down by about a million passengers since its 1995 peak of 12 million. The industry's passenger loads have also been falling steadily from an average of 72.5 per cent in 1997-98 to 68.8 per cent in 1998-99. In the first two months of the current financial year, occupancy has fallen even further and is hovering just above 60 per cent.

GOYAL'S GOODIES

ť Buy return ticket, get 20 per cent off on Taj or Welcomgroup hotels.
ť Buy a return ticket to Goa, chose a Taj holiday plan.
ť Buy return tickets, get up to 40 per cent off in listed hotels at Pune, Calcutta and Ahmedabad.
ť Central and state government employees get 30 per cent off on tickets.

Sahara's attempt to cannibalise passengers from its competitors triggered a round of serious price cuts which travellers like Raheja say were long overdue. "Earlier these airlines were charging us exorbitant rates. Competition is bringing them down to reality." On the "golden" Mumbai-Delhi sector for instance -- a bloody battleground because the 20 daily flights together rake in total daily sales of Rs 2.5 crore or a whopping Rs 900 crore every year -- Jet was quick to slice its fares by 20 per cent and match Sahara's new rate of Rs 4,111. This sector accounts for a quarter of the country's total domestic air traffic.

The real surprise though was when the usually somnolent IA -- which controls nearly 60 per cent of the market against Jet's 31 per cent and Sahara's 9 per cent -- charged into the war last week announcing a 25 per cent cut to Rs 3,800 and taking its fares to a four-year low. "We're playing the game. We have to get our revenues back," says Commercial Director Manet Paes.

IA plans to increase revenue through higher aircraft utilisation and strong marketing. "The first task before me is to market more aggressively," says IA Chairman Anil Baijal. The airline says this strategy will yield a net profit of around Rs 15 crore in the current year against its Rs 10.5 crore profit in 1998-99.

DAMANIA'S DELUGE

ť Buy a return ticket to Goa, choose a holiday plan.
ť Buy a Delhi-Mumbai return, stay one day in a metro hotel.
ť Buy return tickets, win gifts like mixers, cell phones and TVs.
ť Buy Delhi-Mumbai business class return, get limo for 12 hours.
ť Plans home ticketing, bookings on the Net and more gifts.

"They have gone completely berserk," laughs Sahara Director Parvez Damania, of IA's latest fares. His loud guffaw slices through the George Michael number playing on his office computer. "But it just shows that our strategy hit our stronger competitors badly." The airline plans to double capacity this year and expects turnover to jump 40 per cent to Rs 600 crore, up from Rs 428 crore in 1998-99.

Jet officials say that their strong brand name and high quality of service will ensure that passengers do not defect to the competition. "We did not start the fight but if the others want one, we are ready and willing," says Nalini Varma, vice-president, corporate communications. But the airline has been dealt a double whammy by the price cuts initiated by Sahara and the increased frequency of flights from IA. Already, Jet is thinking of pulling out on viable routes like Mumbai-Lucknow due to competition.

Though Damania's innovative gimmicks may have startled the competition, his rivals have been busy drawing up their own strategies. Like the hourly IA Delhi-Mumbai shuttle service introduced in April and dismissed by critics as a flight of fancy. What was the point of adding two more flights when the average occupancy rate on the sector was a measly 40 per cent? "The only passengers will be the crew," some travel agents had scoffed.

But two months down the line, the shuttle -- which added 335 seats to the existing 1,295 -- has resulted in a significant increase in passenger traffic for IA on the Mumbai-Delhi sector. Its daily passenger count has risen from 800 a couple of months ago to 950 now. And the airline is not stopping at that. Its Seven Plus scheme, effective from July, offers passengers one free international return ticket to any of IA's 17 global destinations, in exchange for seven metro boarding passes. On the anvil are more holiday package tie-ups to domestic and international destinations and a co-branded credit card. Which is exactly what the market leader is doing. Earlier this month, IA also introduced a scheme which offered a free return ticket to anybody travelling with a spouse.

Such marketing gimmicks are now becoming a way of life for the three domestic airlines. Six months ago when they were faced with a drop in passenger traffic, the three carriers had used every trick in their bag from cellphones to last-minute check-ins for customers. "Capacity has been growing at 9 per cent for the past couple of years and passenger travel has just not kept up," says Paes.

The three airlines have also spruced up their customer-service operations. Sahara plans to introduce home ticketing and net reservations this month. IA's Buy and Fly scheme allows a customer to walk up to the counter, buy a ticket and board the flight without having to go through reservations and waitlisting. And Jet recently introduced return check-in facilities across metros. So, passengers can collect their return boarding cards even before flying out and report just 20 minutes before boarding. All strategies that will ensure happiness levels among consumers touch new heights.