Fare wars end in the skies

In the coming holiday season, which is that time of the year when passenger traffic peaks in the country, air travellers will not get rock-bottom prices like Re 1 or Rs 99. In all likelihood, they will have to fork out 10 per cent more for tickets than last year.

Travellers in small towns, too, will have little to cheer. Unlike the last peak season, low-cost carriers are not willing to fly to newer destinations as they attempt to cut their losses and consolidate their operations.

Budget carriers SpiceJet, Air Deccan and GoAir confi-rmed that this time they will not go below the Rs-500 mark for a ticket.

Said GoAir Managing Director Jeh Wadia: "Fares are definitely going up and that is a good sign." The carrier is offering 150,000 tickets at a basic price of Rs 500 and above. This is not very different from the low fares that full service carriers are offering. For instance, Jet Airways' lowest fare is Rs 650.

SpiceJet executives said the fare war was over and average fares across the country would now go up. "This will lead to around a 10 per cent increase in the average price over last season. And this increase should sustain throughout the season," said a SpiceJet executive.

Agrees Air Deccan CEO GR Gopinath: "Of course, we expect average fares to go up by Rs 500 or so. That will help us get into profits."

Industry experts say that the rise in fares is directly related to the conscious effort by carriers to scale down fresh aircraft capacity so that supply falls in line with demand.

"While the last two years (April 2005-April 2007) saw five to six aircraft added every month, only ten aircraft have been added in the entire period between April and October this year," said Kapil Kaul, CEO (Indian subcontinent), Centre for Asia Pacific Aviation, adding: "At the same time, the demand for air travel has been growing at more than 30 per cent each year."

GoAir, for instance, has announced that it would reduce its order for Airbus A320s from 30 to 18 by 2009. The carrier, which took delivery of two new aircraft this year, will add capacity only in existing routes like Mumbai, Delhi, Hyderabad, Goa and Bangalore.

"Increasing your frequency in existing markets rather than going to new destinations is a major way of cutting costs. That way you get to improve your yields on the existing market rather than exploring a new one," said a SpiceJet executive. While the carrier added six destinations to its network last year, it has added only three this year.