Fares cheer travellers not airlines

The report that Kingfisher Airlines, Air India and possibly Jet Airlines are likely to cut domestic fares in the New Year brings some much-needed cheer. Kingfisher has spoken of ‘slashing fares’. And while the final reduction effected may not be significant enough to warrant that description, fares are bound to come down. Two reasons. One, the sharp fall in the price of ATF (aviation turbine fuel) following the collapse in global oil prices. From a peak of $147 per barrel in July this year oil now costs less than $40 a barrel. Consequently, there is no justification for airlines not to drop fares. Many have reduced the fuel surcharge imposed when oil prices were on the ascendant.
Expect more reductions in the days to come. The second reason why airlines will be willing to countenance a drop in fares is the steady fall in passenger traffic. As the economy, both domestic and global, slows down, air travel is bound to be hit. Add to that the recent terrorist attacks and the outlook for the domestic travel industry looks pretty gloomy. The signs are there already — only 30 lakh passengers flew in November this year, down from 38 lakh in the same month last year. If that trend is not to get reinforced, airline companies will have to woo passengers more aggressively and in a price-sensitive market like India that is best done through lower prices.
For the flying public then, it is good news. But where does that leave the airline companies? Unfortunately, with not much to cheer! Though the country’s two largest private airlines — Kingfisher and Jet — claim they will break even in the current fiscal, that seems a bit optimistic.
30/12/08 Economic Times

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Categories: Indian Aviation- In General Dec 2008