Mumbai: Air India's move to lower fares by up to 20% on certain routes since January this year to prop up its falling market share is making other airlines see red as they face the prospect of taking a hit on their profits.
Airlines are worried that the national carrier's dash for market share has come at a time oil prices have risen to record highs due to the Libyan crisis, raising their operational costs by as much as 50% in some cases.
" Air India is offering all its seats at prices near the bottom of the yield bucket. They are competing with us by reducing fares by as much as Rs 1,000, especially on the Delhi-Mumbai route," said the CEO of a low-cost airline who did not wish to be identified. "A drop of Rs 100 in yield will bleed airlines by Rs 3 crore."
Despite having the largest fleet, Air India was recently overtaken by low-cost airline IndiGo in terms of market share. The national carrier has a market share of 15%. It has long lagged behind Jet and Kingfisher.
Air India's move has had some impact in the January-March 2011 quarter, said analysts. "Air India has dropped fares in the last quarter by 20-30%. This has forced other airlines to follow suit.
13/04/11 Manisha Singhal/Economic Times
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