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The benefit that these tickets provide to an airline is instant money to use up. If in one 'issue' of 3 lakh tickets, the airline manages to sell off two thirds (2 lakhs) of these tickets "free", the instant money that the company can make is around INR 24 crores. This money is immediately available for use as their working capital.

But all this may just even seem to be utter short-sightedness and a new way to accumulate losses. For instance, as recently Vijay Mallaya commented about Air Deccan - The company gets average revenues per passenger as Rs. 2600 while each passengers cost comes out to be around Rs. 2900. If that is the case then just to get instant money to keep the airline's day-to-day business running, the company is giving away free tickets, it is nothing but sheer short-sightedness of running a business. (It is noteworthy that Air Deccan is not the only one which is offering cheap or free tickets, it is a practice being followed across the low-cost carrier segment)

Passengers Dish Out More

For the passengers, this era of consolidation in the Indian aviation sector implies one main thing - An Increase in Fares!

No more free tickets! Soon after getting the 26% stake in Air Deccan, Vijay Mallya told the media that Air Deccan will no longer sell tickets at a loss. He added that an INR 500 increase in fares will be enough to convert Air Deccan into a profit making airline.

Airliners Win

In the end, the winners will be the promoters of various airlines who are set to convert their loss-making ventures into money-spinners, courtesy the raised fares.

All one would like to see now is where will this consolidation spree halt?

Concluded.

* Contributed by: -
Shekhar Arya,
MBA 1st Year,
Department of Management Studies,
Indian Institute of Technology, Roorkee.