Why MakeMyTrip's Shares Plunged
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What: Shares of Indian online travel site MakeMyTrip (NAS: MMYT) were hitting some turbulence today, falling as much as 19% in intraday trading.
So what: What good is a travel website without access to airlines? Investors appeared to be asking themselves that today as MakeMyTrip butted heads with IndiGo and Jet Airways, two major airlines in India. The airlines are ticked about MakeMyTrip's continued use of "opaque fares" -- the practice of offering customers a deeply discounted plane ticket, but not revealing who the carrier is until the purchase has been made.
India's Directorate General of Civil Aviation had asked airlines to stop publishing opaque fares last month and IndiGo, which pulled all of its flights from the website, contends that MakeMyTrip didn't comply. India's Business Standard quoted IndiGo's president, Aditya Ghosh, as saying:
The arbitrary display of fares and opaque pricing is anti-consumer and in violation of DGCA norms and directives. We have raised this with MakeMyTrip on several occasions but, unfortunately, there has been no resolution. We were therefore left with no choice. IndiGo can't be seen supporting a blatant violation of the law.
Now what: The solution seems pretty simple -- cut out the opaque fares. But the bigger question may be whether MakeMyTrip can repair its relationship with IndiGo and Jet Airways. Furthermore, if IndiGo sees the current rift as an action that it had to take after trying multiple times to work with MakeMyTrip, there may be concern for investors that the company is trying to skirt regulations, or, at least, best practices.
Whether that's the case remains to be seen, but after a hefty drop today, MakeMyTrip needs to not only repair the relationships with the airlines, but also the perceptions of its investors.
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