Low-cost airlines to slash prices, big rivals stay in hangar

Low cost carriers will respond to the cut in air traffic fuel (ATF) prices by paring fares but Indian Airlines (IA) and Air-India (A-I) are unlikely to do so.

Spice Jet and Kingfisher plan to cut fares up to 5 per cent and Air Deccan by 2.5 per cent. Officials at both the government carriers, however, said no decision has been taken as yet regarding a reduction in fares. Jet Air and Sahara were not available for comment.

Alex Wilcox, chief executive officer of Kingfisher Airline, said: " ATF accounts for almost 30 per cent of our cost component and a reduction of 10 per cent does mean significant reduction for our airline."

Ajay Singh, director of Spice Jet, said the company was looking at passing on the benefits of cost reduction in ATF to its travellers.

G R Gopinath, chief executive officer of Air Deccan, said: "We would reduce the ticket price by 2.5 per cent." This means a Mumbai- Delhi flight that cost Rs 3,771 will now be priced around Rs 3,676.

Wilcox has stated that more seats would be available in the Rs 2,999 bracket for Mumbai to Bangalore, while SpiceJet was finalising its new rate card in some days.

Big airlines such as Indian Airlines and Air-India are not particularly ecstatic about the reduced ATF prices.

Officials at IA and A-I said ATF prices were increased by 5 per cent in April 2005 to Rs 32, 250 a litre and further to Rs 34,800 a litre in May 2005. Considering these fluctuations, no decision has been taken as yet regarding reduction in fares.

Air-India sources said this reduction will only reduce the fuel surcharge and will be beneficial to domestic airlines, which have to fill fuel within the country than international carriers which would fill it up from different sources. For low-cost airlines though, the reduction in ATF does translate into quite a bit of savings.

Spice Jet, for example, used to pay Rs 33,036 per kilo litre in Delhi. Now it would be paying Rs 29,921 for the same. Similarly, Air Deccan, which incurred Rs 90 crore as expenditure on fuel in the last financial year, will pay 8 per cent less this year.