Airfares may be slashed

THE HINDU,02FEB2015

Domestic airfares are likely to reduce by 5 to 10 per cent in the 30 days advance purchase segment as oil companies on Sunday cut Aviation Turbine Fuel (ATF) price by 11.3 per cent in line with the fall in international crude oil prices.

With this cut, the ATF price has been reduced to Rs. 46 a litre, making it even cheaper than diesel which costs between Rs. 51 and 56 per litre.

Airlines declined to commit themselves stating that airfares in India are not cost-related and the possible downward revision cannot be of the same proportion as the cut in ATF price.

There has been a cumulative 33 per cent reduction in ATF price since October and airlines are taking this opportunity to reduce their losses rather than passing on all the benefits to passengers.

However, those booking early can benefit by up to 10 per cent while those booking at the last moment will pay the market price depending upon the demand supply situation in that particular sector.

Airlines follow dynamic pricing in fares and charge through a non-transparent slabs system, so it is difficult to quantify the quantum of reduction for all segments of passengers.

“Fares are now 20 to 30 per cent cheaper as compared to November and December fares. This is lean season and in a competitive market, prices should come down. But don’t expect drastic reduction as airfares are not on cost-plus basis in India. This is an opportunity to recoup losses,” said a senior airline official.

However, travel industry experts said that the lower ATF price regime will prompt airlines to come out with aggressive promotional offers to lure passengers, like the 5 lakh seat flash sale by SpiceJet.

Analysts said now the floor is set for a price war among airlines through they would be careful to make some money in this quarter as such opportunity rarely comes.