New Delhi: The country’s low-fare airlines have slashed ticket prices by 15-25% hoping to boost passenger traffic in the traditionally lean monsoon season that starts in July. But the reductions come at a time when aviation turbine fuel prices have increased 22% over the previous month.
Analysts say airlines have no option but to manage the high costs as well as stimulate demand at the same time to tide over the July to mid-September period, considered the weakest quarter for India’s airline industry.
Jet fuel prices increased to $75.6 (around Rs3,575) a barrel as on 5 June, according to the International Air Transport Association’s (Iata) website based on data from energy information provider Platts.
Samyukth Sridharan, chief commercial officer, SpiceJet Ltd, said in a Wednesday statement that the low-fare airline has cut fares for travel between July and mid-September in all its 18 sectors on tickets booked before Saturday.
Graph shows new airfares. Sandeep Bhatnagar / Mint
The airline, which operates 125 flights daily, is offering tickets priced at Rs1,430 for the short New Delhi-Srinagar route, and at Rs1,930 for the longer New Delhi-Mumbai haul. The fares include airport taxes, fuel surcharges and passenger service fees. This promotion, Sridharan said, was important to attract passengers and “stimulate the market during the coming season”.
SpiceJet currently charges Rs2,400 for the New Delhi-Mumbai route on tickets booked a month in advance.
Rival carrier IndiGo, run by InterGlobe Aviation Pvt. Ltd, sent text messages to its frequent fliers on Wednesday announcing all-inclusive fares starting at Rs1,300 between 1 July and 15 September, on tickets booked by Saturday. IndiGo runs 137 daily flights on 19 routes. GoAir, owned by the Wadia group, had already announced fares of Rs1,750 for the lean season on bookings made till 14 June.
Jet Airways (India) Ltd’s low-fare subsidiary JetLite on Wednesday said it has also introduced “special, all-inclusive fares” on several routes for bookings till Saturday.
Jet Airways is also reducing fares on several sectors. Fares will be available in the range of Rs1,650-2,700 for travel till 30 September, the airline said in a statement.
“We will not do it any different. It’s a competitive market,” said an executive with Jet Airways. The executive didn’t want to be identified.
Jitender Bhargava, executive director of Air India, which is run by the state-owned National Aviation Co. of India Ltd, or Nacil, said the airline monitors the market on a regular basis, keeping in mind passenger loads and market conditions. “We will respond on the fares accordingly.”
The low prices may strain profits further for Indian carriers, already facing an estimated combined loss of at least $2 billion in 2008-09, especially with jet fuel prices crossing $70 a barrel, an analyst said.
“Passenger demand is slowing down, and Q2 (second quarter) is always a weak period. This time it may be a little more weaker then last year,” said Kapil Kaul, India chief executive for the Centre for Asia Pacific Aviation. “Fuel, in the short term, will be higher, even going above $70. But eventually (it) will fall down.”
State-run oil companies such as Indian Oil Corp. Ltd increased jet fuel prices earlier this month to Rs108 per kilolitre on average. If oil prices continue to rise further, airlines expect oil firms to increase this further when prices are revised mid-month.