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International airfares may decline by Feb

International airfares may decline by Feb
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First Published: Wed, Dec 10 2008. 11 26 PM IST
Updated: Wed, Dec 10 2008. 11 26 PM IST
New Delhi: Airfares on some international routes are likely to drop by as much as a fifth by the end of next month as the entry of Kingfisher Airlines Ltd into sectors already serviced by multiple airlines triggers new price competition between carriers early in the new year, some travel industry executives say.
Kingfisher Airlines plans to launch Mumbai-London, Mumbai-Hong Kong and Mumbai-Singapore flights in January, competing with National Aviation Co. of India Ltd-run Air India, Jet Airways (India) Ltd and several international carriers.
“The additional capacity is likely to result in lower fares on the routes which they plan to operate,” said Sydney-based Binit Somaia, regional director for the Indian subcontinent and the Middle East at the Centre for Asia Pacific Aviation.
Airlines have been battling a slump in domestic traffic amid a crisis and high aviation fuel prices that have dented profitability. Kingfisher’s new international flights will mark the end of its freeze on new overseas operations.
A Kingfisher Airlines spokesman said the carrier may announce promotions for its new flights but has no intention of offering cheap tickets. “We are definitely not going to do cheap pricing. It will be on par with the market and offer a value proposition,” the spokesman said.
In September, Kingfisher’s entry into the London sector with a flight from Bangalore led to rivals like British Airways Plc., Virgin Atlantic Airways Ltd, Air India and Jet Airways slashing fares by Rs10,000-12,000. This time, the airline has opened bookings just a month in advance in the peak season. Seat bookings on international flights typically open at least three months in advance.
Neither international nor Indian carriers have hastened to announce promotions or discounts in response to Kingfisher’s imminent entry because market dynamics are different, said Sanjeev Bhasin, assistant vice-president at travel portal Makemytrip (India) Pvt. Ltd.
“For international carriers, it’s peak season,” he said. “I haven’t seen any airline coming out with any promotions. For the first 10 days of January the outbound is already booked. Maybe by the last week of January, when the season ends, the real fight between the carriers will begin.”
But Bhasin expects a drop of 15-20% in airfares by the third week of January after the end of the peak season.
Most travellers, including people of Indian origin who travel home to spend the Christmas-New Year holiday in India, return by the first half of January and book their air tickets much in advance.
“A fare war will not start so early because we are entering into a peak season. You will definitely see the impact in February when they (airlines) will start feeling the heat (of increased competition),” said Amit Kapoor, assistant vice-president for business development at Mumbai-based travel portal Travelguru.com.
Return economy fares on the Mumbai-London route next week begin from Rs43,043 on Jet Airways, going up to Rs51,522 for Virgin Atlantic. The fare in mid-January drops to Rs28,873 for Kingfisher Airlines, or at least Rs14,000 cheaper, compared with Rs41,132 on Jet Airways.
Bhasin said the higher fare maintained by Jet Airways even toward the end of the first fortnight in January shows that its flights are booked for the sector. There is little need for airlines to cut fares immediately, he said.
Kingfisher will also be offering more seats on these routes than rivals as it plans to operate with large passenger aircraft such as A330s, with 217 seats. Filling the seats will remain a challenge in an economic downturn, when companies are cutting back on air travel.
“Corporates are not flying as much, they are getting into Web conferencing. Will they be able to fill the seats? I am not sure,” said Travelguru’s Kapoor.
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First Published: Wed, Dec 10 2008. 11 26 PM IST