Tuesday, January 22, 2013

After SpiceJet, Air India slashes fares; budget carriers likely to follow suit

DELHI: SpiceJet's recent mega sale has triggered a tussle between other Indian airlines who are dropping fares discreetly - leading to an almost silent fare war.

Air India was the first to drop fares, taking them lower than rival full-service carrier Jet Airways, and matching the prices of the three budget carriers on every route.

According to the travel fraternity, IndiGo, SpiceJet and GoAir might drop ticket prices to protect their market shares. "Passengers will prefer to fly AI over low-cost carriers to avail of better services like in-flight entertainment, meals and the like," said Sunny Sodi, COO (Corporate Travel) and Senior VP (Air Product) of yatra.com.

Experts also say that Air India, which has expanded its domestic market-share from a dismal 14% to over 21% last year, doesn't want to lose its hard-earned lead.

"We are heading towards a further reduction in ticket prices as budget airlines may slash fares further after AI has matched them. In comparison with December, we may see fare reduction by 15% in the coming days," Sodi added.

However, Air India says that its move is in response to a move by Jet Konnect, which dropped fares on 20 routes to match budget airlines' levels. "We thought it was a short-term strategy by Jet Konnect but when it went on for over ten days and there was the possibility to lose passengers, we too did the same," a senior Air India official told ET. He added that AI fares have been cut on only six routes, most of which are metro routes.

On January 11, Kalanithi Maran-owned airline SpiceJet announced 10 lakh seats on offer at Rs 2,013 for travel between February and April, which could be booked over three days.

Travel agents had forecast at the beginning of the year that this year would witness exciting discounts on airfares as air traffic in 2012 had shrunk when compared to 2011. The number of passengers carried by domestic airlines during January-December 2012 stood at 588.19 lakh against 606.63 lakh during the corresponding period 20011, a drop of 3.04%. 

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