Price war takes off again: Local airlines begin to cut basic fares

Mumbai: After a four-year lull, there is a price war in the sky again. Domestic airline companies have started offering airfares that are comparable with those witnessed in 2005.
The drop in airfares is nearly across all the routes in the country. For example, a Delhi-Mumbai Jet Airways ticket now costs Rs 2,900, a sharp drop from Rs 5,350. JetLite, Jet Airways’ subsidiary, is offering a Mumbai-Delhi ticket for Rs 1,650, all inclusive, against the earlier price of Rs 2,845.
Budget carriers, such as GoAir and IndiGo, are offering fares in the range of Rs 2,175 to Rs 2,700, including taxes, for the Mumbai-Delhi sector.
Experts said the move could be explained by a steep fall in the prices of aviation turbine fuel (ATF), which accounts for more than 45% of an airline’s costs. In the past five months, ATF prices have declined by about 60% to Rs 30,457 per kilolitre. They are now quoting around July 2005 levels. However, they are not certain whether the drastic cut in airfares would be able to prop up the balance sheets in the sagging airline industry, which is expected to post a combined loss of $2 billion for fiscal 2009.
Industry experts believe that reduced prices may not generate enough additional traffic and revenues in the current economic scenario.
26/01/09m Mithun Roy/Economic Times

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Categories: Indian Aviation- In General Jan 2009