lower fares dont mind

In a take-off mode for three years, SpiceJet CEO Sanjay Aggarwal landed in India as the company's head when Indian airlines were facing turbulent times. In just three months, he has wrestled a 12 per cent market share for his low-cost carrier, up from 8 per cent last year; in a market where demand is at an all-time low. For 2009-10, the year when he hopes to make a small profit, the company is aggressively looking at expanding its footprint, the CEO tells Smita Aggarwal in an interview. Excerpts:

Fuel still accounts for about 40 per cent of our operating costs. Even if we lower fares, the demand just isn't there. In January, we sold at the rate of Rs 2,300-2,500 per ticket, but we still had only 68 per cent load factor. At Rs 2,300 a ticket, we need 110 per cent load factor to break even. Fares in January were totally unsustainable. So we increased them in February.

Globally, one airline increases fare and waits to see if everyone else follows. If everyone follows, the fares go up. If no one follows, the airline that took it up, brings it down. In SpiceJet's case, we took the fares up on January 29, we sat there with our high fares for 24 hours, looked back, no one followed. We pulled it down. Then a week later, on February 3 or 4, we tried again. This time, four hours later, IndiGo followed, six-seven hours later Jet Airways and Kingfisher Airlines followed. So this time it stuck.

When fares went down to Rs 2,300 in January, no one accused us of cartelisation. The demand has slowed down in comparison to January. However, we are bringing in more revenue per flight by anywhere between 15-20 per cent despite lower bookings. At the end of the day, revenue generated per flight matters. Because once that flight takes off, there are certain costs that we have incurred. The people who have to fly will continue to fly.