Will private airlines cut airfares?

New Delhi: As oil prices come down, the voices in favour of reduction in airfares have started gaining in strength. None less than the Minister for Civil Aviation, Praful Patel has indicated to private airlines that he would like to see the airfare going down. Speaking at the Hindustan Times Leadership summit, he said the main market for airlines were the masses and growing the no frills category was a must for the air transport industry.
However, Jet Airways chairman Naresh Goyal and Kingfisher Airlines chairman Vijay Mallya, said they had little room to bring prices down.
Goyal said his books were open. And if some one could show him that he was wasting money, he would be glad to correct that. “We are willing to do whatever the minister or the ministry want, but we have to be profitable,” he said. Mallya too agreed with Goyal and said that it was too simplistic to conclude that since the prices had come down, one would be able to reduce airfare as well.
But the government is sticking to its stand and says that the private airlines must reciprocate in kind to the helping hand the government has extended to them recently. These include extending the deadline for airlines payment of Rs 2000 crore to oil companies.
Minister Patel says that the price of oil has come down by over 45% and airlines should bring down the airfare accordingly. He adds that the market is a competitive one and if others decide to lower airfares, the market leaders will have to follow suit.
The minister also hinted that state carrier Air India may also be asked to reduce prices as a mechanism to bring the overall fair level down in the economy.
24/11/08 Taneesha Kulshrestha/Livemint

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Categories: Indian Aviation- In General Nov 2008