AI likely to announce fare cut in January first week

AI likely to announce fare cut in January first week

New Delhi: Air India could soon bring good news for air travellers by announcing a cut in base fares on its domestic routes from the middle of January, official sources said here.

Though its private competitor Kingfisher Airlines has declared that it would reduce fares only after the government decides to include jet fuel in the list of ‘Declared Goods’, Jet Airways could follow suit, they said.

Sources said the Commercial Department of Air India was already working on reducing the fares and could make an announcement in the first week of January for slashing the fare prices effective from the middle of the month when the peak travel season comes to an end.

Besides Air India, Kingfisher, Jet Airways, SpiceJet and Indigo have already reduced fuel surcharge on all domestic flights, resulting in the airfares dropping by up to Rs400. The reduction followed successive cuts in aviation turbine fuel prices by oil marketing companies.

In another development, the Civil Aviation Ministry has asked the Directorate General of Civil Aviation (DGCA) to crack its whip on domestic airlines continuing with the congestion surcharge of Rs150, despite substantial fall air traffic congestion over major airports like Delhi and Mumbai, the sources said.

Many airlines also club these surcharges as ‘taxes’, though the only tax component in a ticket was the Passenger Service Fee (PSF) of Rs225, they said, adding that the airlines have been instructed to show the surcharge and taxes separately.

Civil Aviation Minister Praful Patel has been asking airlines to cut fares to boost the falling passenger traffic. “When ATF (aviation turbine fuel) prices have come down, so should the fares," he said recently.

When airlines were in difficulty, the government came to their rescue by giving extra line of credit, allowing staggered repayment of their estimated Rs3,000 crore dues to oil companies, abolishing 5% customs duty on ATF.

Patel had then said that it was now imperative for the airlines to respond.

The boom in Indian aviation has tapered off due to high air fares, primarily caused by soaring fuel prices and rising tax rates on ATF.

The passenger load factor, or the number of passengers carried by airlines vis-a-vis the number of seats available, showed a marked decline in the recent weeks when the peak travel season began.

The demand for reduction in air fares had also echoed at a recent meeting of the Parliamentary Consultative Committee attached to the civil aviation ministry, with several MPs demanding that airlines should pass the benefits of the drastic cut in oil prices to their customers.

Meanwhile, Patel is likely to meet Prime Minister Manmohan Singh in the coming days to discuss the issue of including ATF in the list of ‘Declared Goods’, which would enable imposition of a flat 4% tax on it across the country.

However, the state governments have sternly opposed the proposal saying they would stand to lose a lot if a central tax was imposed on jet fuel and have demanded compensation from the Centre.