Private airlines unlikely to cut fares during peak season

Private airlines unlikely to cut fares during peak season

Mumbai: Air travellers will have to wait till February before private sector carriers cut fares, which could happen earlier only if the government reduces sales tax on jet fuel.

Though National Aviation Co. of India Ltd, or Nacil, that runs Air India, has decreased fuel surcharge by Rs400, carriers that include Jet Airways (India) Ltd, Kingfisher Airlines Ltd, Paramount Airways Ltd, Interglobe Aviation Pvt. Ltd, SpiceJet Ltd and GoAirlines (India) Pvt. Ltd are unlikely to follow suit. Interglobe Aviation runs IndiGo and GoAirlines runs low-fare carrier GoAir.

This is despite a 6% reduction in prices of jet fuel, which accounts for 45% to 55% of the operating cost of airline firms.

“We will continue to stimulate the market with attractive discount schemes and have no immediate plans to reduce fuel surcharge," said a senior executive with a Mumbai-based private airline on condition of anonymity, considering the sensitivity of the issue.

State-owned Air India has reduced fuel surcharge for domestic flights by an average of 14.5%, citing lower fuel prices since September.

Kingfisher Airlines’ executive vice-president, Hitesh Patel, declined to comment but said his chairman “has indicated a fare cut following government’s support on ATF (aviation turbine fuel) prices cut."

On 24 November, Kingfisher Airlines chairman and chief executive Vijay Mallya said if the government introduces a Bill in Parliament to bring jet fuel under the declared goods category, thereby attracting a uniform sales tax of 4% across the country, the firm will “immediately reduce air fares across the board".

Wolfgang Prock-Schauer, chief executive of Jet Airways, was unavailable for comment.

Four aviation analysts Mint spoke with said Air India cut fuel surcharge under government pressure, while private carriers are not ready to compromise on yields. They are likely to respond to the Air India’s move by offering various incentives or cutting capacity.

“As December is a peak season for airlines, we expect a price cut after January to stimulate the market. Fuel prices are still volatile. Aviation industry is not still confident oil prices will hover under $55 a barrel. Private airlines cannot frequently change the ticket prices to suit the fuel price movement," said Vijay Nara, an analyst tracking aviation stocks with domestic brokerage Centrum Broking Pvt. Ltd.

Jet Airways has introduced an eight and 15-day apex fares on key domestic routes, and Kingfisher Airlines is offering a free return London-Bangalore ticket for four return flights in first class on domestic routes. GoAir has introduced special offers to corporate travellers and young passengers.

The carriers may look at responding to demand slowdown of traffic by either cutting the capacity or through innovative ticket pricing rather than bringing fares down, said Kapil Kaul, CEO, Indian subcontinent and West Asia, Centre for Asia Pacific Aviation, an aviation consultancy.