Ongoing mass cancellations of flights and the Airport Authority of India’s decision to put SpiceJet on a cash-and-carry mode have made online travel agencies nervous.
Full service airlines which are members of International Air Transport Association give seven day credit to travel agents to make payments for ticket sales, whereas low cost airlines, including SpiceJet, collect advance amounts from agents. In turn agents are allowed to sell tickets of a higher sum than their deposits.
The deposits vary from season to season and airlines typically collect higher deposits during flash sales. This enables agents to increase sales. Over the last few months, online travel portals are limiting the deposits placed with the airline and recent developments have added to their concern.
SpiceJet has a market share of 17.3% in October and 18.5% in January-October period.
The airline did not respond to an email query on issue.
“Everyone would be cautious considering the reports about health of the airline. Let’s hope for the sake of Indian economy that the airline manages to pull through,” said a senior executive of a leading online travel agency.
Travel trade community fears that in case SpiceJet goes bust they could face the same difficulties in securing refunds for their customers as they did when Vijay Mallya-promoted Kingfisher Airlines was grounded. However the airline management insists that the airline is not going the Kingfisher way.
In the past few weeks, the operating environment has improved and noted value investor Rakesh Jhunjhunwala picked up 1.4% stake in the airline. Analysts too are hopeful that a turnaround is possible but say it will depend on further cash infusion.
“Based on an expected fall in ATF prices, further cost rationalisation and sensible revenue management post recapitalisation, it is possible to see SpiceJet’s turnaround in the next 12-18 months,” says Kapil Kaul, chief executive officer (South Asia) at the Centre for Asia Pacific Aviation.