Wednesday, December 31, 2008

Air India cuts domestic fares by up to 82%

MUMBAI: Air travellers have some reason to cheer almost at the fag end of the

festive season.

The state-owned carrier Air India has cut fares by up to 82% in 20 sectors on Tuesday, mostly on metro routes, following a dip in aviation turbine fuel (ATF) prices. �The airline is cutting basic fares by 35-82% on domestic sectors,� said a spokesperson of National Aviation Corporation of India (Nacil), which controls Air India.

Jet Airways� subsidiary, JetLite, too reduced basic fares on all its domestic flights with immediate effect. These fares will now be lower by up to 40%, Jet Airways said in a statement on Tuesday. A Mumbai-Delhi economy class basic fare will now be available for as low as Rs 750; the Mumbai-Chennai basic fare is at Rs 595; Ahmedabad-Goa is at Rs 245, while the Delhi-Hyderabad fare at Rs 999, without taxes.

On Sunday, Kingfisher Airlines chairman Vijay Mallya promised to slash fares from January 1. While he did not mention the exact percentage, experts believe it could be in the 10-15% range, which means fares could drop by Rs 500 to Rs 1,000. Jet Airways had already cut its basic fares by 15-40% with effect from Monday.

ET had first reported in its edition dated December 17 that Kingfisher and Jet have decided to cut basic fares on the domestic routes.

Meanwhile, budget airlines � SpiceJet and IndiGo � are likely to trim fares by 8-10% from mid-January. SpiceJet director Ajay Singh confirmed it to ET, but declined to divulge exact cuts. He said the cut will be �substantial� across sectors. �An announcement is expected shortly,� he added.

While some carriers earlier this month had reduced the fuel surcharge on the ticket price by Rs 200 to Rs 400, they did not touch the basic fare. Airlines had introduced fuel surcharge of Rs 200 in November 2005 when ATF was ruling at Rs 35,761 per kilo litre.

Oil companies have reduced aviation fuel prices seven times since September. The fuel is now sold at Rs 32,691.28 per kilolitre in Delhi, after prices were slashed by Rs 4,208.37 in the first week of December.

Industry experts said ATF prices would be further slashed on December 31 and January 15 by at least 15%, in line with the drop in global crude oil prices. In fact, Merrill Lynch had anticipated that crude prices will touch $25 a barrel in 2009. It was hovering at around $147 in mid-July this year.

Domestic air traffic has hit a record low this November, with just 30 lakh people flying compared with 38 lakh last November � a drop of 21.3%.

Falling ATF prices will help loss-making airlines reduce their operating costs. Besides, a cut in air fares will help increase the load factor, which has fallen from 75% a year ago to around 45% now, said an analyst with domestic brokerage firm. ATF accounts for nearly 45% of an airline�s operating costs.

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