Airlines cut fares by 15%

MINI BUDGET 2004

All major airlines are slashing their fares by 15 per cent from tomorrow, taking "apex fares" below first class air-conditioned train fares, as a result of the government's decision to abolish inland air travel tax (IATT) and pare excise duty on aviation turbine fuel.

Airline executives said they were calculating the impact of the cut in duty on aviation turbine fuel and would make a further announcement in a few days. Fares could, therefore, come down by as much as 20 per cent.

Officials of Indian Airlines, Jet Airways and Air Sahara said the abolition of tax would immediately be implemented and passengers would get the benefit from tomorrow.

Spokespersons of IA and Jet Airways said apex fares would also be reduced from tomorrow with the abolition of the IATT, taking them below the first class air-conditioned fares.

Saroj Datta, Executive Director, Jet Airways said, "If we don't have to pay the 15 per cent inland air travel tax, passengers won't be charged this."

The excise duty cut on aviation turbine fuel from 16 per cent to 8 per cent will trigger a decline of Rs 1.5 to Rs 1.75 per litre in ATF prices.

This will, in turn, lead to a reduction in operational costs. Basic domestic airfares could come down by as much as 20 per cent, said Ashwini Kakkar, CEO & managing director of Thomas Cook (India).

Indian carriers bear the burden of a host of levies, including sales tax, excise duty, surcharge on sales tax, turnover tax, ex-storage point price and octroi, besides 15 per cent IATT on domestic airfare. All this comes to around 35 per cent of the basic airfare and is passed on to the passenger.

Ranjit Malkani, CEO, Kuoni Travel group, India said, "The move will translate into lower air fares, making air travel more affordable for the middle class. The measures will definitely provide a big boost to the domestic travel industry with some travellers shifting from railways to airlines. This will also contribute to an increase in domestic tourism with travel to popular destinations (classical holidays like Goa, Kerala, Rajasthan) gaining the most."

In addition to this, reduced airfares will also bring about an increase in the frequency of domestic holidays taken.

As far as business travel is concerned, while lower airfares will result in decreased turnovers, the overall market is definitely going to grow, leading to a rise in total transactions.

Thus business travel too will benefit from the tax cuts, Malkhani added.

Flying high

• Jet Airways cuts fares by 15%, Air Sahara, Indian Airlines to follow suit
• Fares from Delhi to Mumbai, Chennai, Bangalore to fall by Rs 850-1,450
• Air-India expects Rs 7 cr savings, Indian Airlines Rs 60 crore due to halving of excise duty on ATF