Kingfisher to slash fares by 10-15%

NEW DELHI: Airlines are all set to woo back passengers who had given up flying due to high fares in last few months. On Sunday, Kingfisher Airlines chairman Vijay Mallya promised to `slash\' fares from January 1. While he did not quantify the cut, sources say it would be between 10% and 15%. Which means that in addition to last month\'s reduction of fuel surcharge by Rs 400, the fares could further drop between Rs 500 and Rs 1,000.

Jet Airways has decided to cut its basic fares by 15-40% to take on the competition with effect from Monday. So, overall fares of Naresh Goyal-promoted airline are expected to come down by 5-10%.

Air India (domestic) is also likely to announce a `sizable\' reduction in first week of January as the aviation ministry has specifically asked it not to do a cosmetic farecut job. Low cost carriers like IndiGo and SpiceJet are also working on offering attractive schemes, including low advance booking fares to get the AC II tier train traveller back in air.

Mallya said: Kingfisher will begin the new year on an aggressive note by slashing airfares. The current low prices of aviation turbine fuel (ATF) allow Kingfisher to pursue an opportunity to significantly increase market share by offering the finest five star flying experience at reduced fares.

Airlines had introduced fuel surcharge of Rs 200 in November 2005 when ATF was costing Rs 35,761 per kilo litre in Delhi. As ATF rose to its highest ever level of Rs 71,028 (riding on crude) in August, surcharge was in range of Rs 2,250 to Rs 3,100. But when ATF fell by more than half last month and is currently at a three-year low, airlines cited huge losses and effected a mere Rs 400 cut in surcharge and that too was forced by AI taking the lead.

There was increasing pressure on the aviation ministry that had ensured huge benefits for airlines to force airlines to lower fares now. Airlines must pass on the benefit of cheaper fuel and get passengers back in air. Saying that the dues of past few cost hostile months will not allow them to drop fares, will only mean a dramatic drop in passenger numbers in the lean travel quarter of January-March, said a senior aviation ministry official.

Interestingly, Mallya\'s statement of eyeing a bigger market share also indicates that the present cost environment is such that airlines are now close to break-even points and planning to begin the fight for leadership again. Last month, the Jet-JetLite combine led the market with a 26.7% share followed by Kingfisher (with Air Deccan(Kingfisher Red) merged in it) at 25%. AI (domestic) was at 18% and IndiGo led the LCC segment with 14.7% share, followed by SpiceJet at 11%.