Online travel agents wary of SpiceJet following cancellations, AAI restrictions

The travel trade community fears that in case SpiceJet goes bust they could face difficulties in securing refunds

Frequent cancellation of flights and the Airports Authority of India’s decision to put SpiceJet on a cash-and-carry mode have made online travel agencies nervous. This is because while full-service airlines, which are members of International Air Transport Association, give seven-day credit to travel agents to make payments for ticket sales, low-cost airlines such as SpiceJet do not follow the model and instead collect advance amounts from agents. For this, agents are allowed to sell tickets of a higher sum than their deposits.

The deposits vary between seasons airlines usually collect higher deposits in times of flash sales. This enables agents to increase sales. Over the past few months, online travel portals have been limiting the deposits placed with SpiceJet and the latest developments have added to their worries. SpiceJet has a market share of 17.3 per cent in October and 18.5 per cent in January-October period. It did not respond to an email query on matter.  

“Everyone would be cautious considering the reports about the 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.

The travel agents fear that in case SpiceJet goes bust, they could face same difficulties in securing refunds for their customers. However, the airline management insists 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.