Budget airlines may feel heat of fare cut

Budget airlines may feel heat of fare cut
Comment E-mail Print Share
First Published: Wed, Feb 27 2008. 12 47 AM IST
Updated: Wed, Feb 27 2008. 12 47 AM IST
Mumbai/ New Delhi: Railway minister Lalu Prasad’s move to reduce fares of air-conditioned (AC) as well as second-class railway passage will hit the short-haul routes of low-cost airlines, but their long-haul routes will remain unaffected, say airline representatives and analysts.
In the Railway Budget for 2008-09, Prasad announced a 6% reduction in the fares of sleeper-class coaches and 2% in AC 3-tier and AC chair car coaches. Last year, he cut AC fares by 8%.
An analyst with a domestic brokerage, who did not wish to be identified, said the short-haul routes of airlines that can be covered by rail in 5-6 hours will bear the brunt of the railway minister’s proposal of paring fares.
Capt G.R. Gopinath, who introduced the low-fare airline concept in India and founded Deccan Aviation Ltd that runs country’s largest low-fare carrier Simplifly Deccan, however, did not anticipate any immediate problem. “With fare reduction in the AC coaches, second-class passengers will continue to graduate to AC classes. Likewise, AC travellers will upgrade to airlines,” he said.
SpiceJet’s director Ajay Singh doesn’t expect passengers to stop flying. “Last year, too, there was a reduction in upper class fares (but it didn’t affect us),” he said, adding a Rs50-100 change doesn’t matter to the passenger as a trade-off for several hours saved.
According to Jeh Wadia, managing director of Mumbai-based low-fare carrier GoAir, run by Go Airlines India Pvt. Ltd, the fare cuts announced in the rail budget may have been prompted by “the phenomenal 33% growth recorded by the Indian aviation sector in the last year.”
InterGlobe Aviation Pvt. Ltd-run IndiGo’s chief executive officer Bruce Ashby ruled out any fare reduction to counter the railways, but does not expect a steep hike in airfares “anytime soon”.
This, analysts say, is key to the low-cost airlines’ strategy to “fight” the railways.
“They will think twice before raising the fare. It won’t be easy,” said a Mumbai-based analyst, who did not wish to be identified.
pr.sanjai@livemint.com
Comment E-mail Print Share
First Published: Wed, Feb 27 2008. 12 47 AM IST