AI to cut international travel fares to counter competition from Jet-Etihad

International travel out of India is set to get cheaper with Air India looking at offering lower fares on stop-over flights to stave off competition from the Jet-Etihad duo on long-haul routes to the Americas, Europe.

A senior executive at Air India said, "While we will continue to charge a premium in non-stop flights, we will offer competitive rates for destinations where we have even one stop-over."

A rejigged fare structure would enable Air India to boost load factors in international sectors where it is expected to face intense competition from Jet-Etihad combine post the completion of the stake sale agreement with Jet Airways.

A senior executive in the travel industry said, "With Etihad pairing up with Jet Airways and the issue of fresh bilateral to Abu Dhabi, a fare war is expected on all routes. Jet Airways can connect feeder traffic within India to Delhi or Mumbai then on to Abu Dhabi and beyond. To sustain business, other airlines would have to look at offering competitive fares."

In the India-US sector, for instance, Air India operates 15 stopover flights between Mumbai and Chicago, and Mumbai and New York.

It also operates 16 flights from New Delhi to Newark via Mumbai- with added stopovers in five flights at Indore, Jodhpur, Udaipur, Jaipur and Aurangabad.

As part of the commercial co-operation agreement with West Asian carrier Etihad Airways, Jet has already drawn out a blueprint to start operations from Mumbai to Newark, Bangalore to Chicago and Delhi to New York by setting up an alternative international hub in Abu Dhabi to take on Air India.

According to studies, the India-North America market is growing annually by just under 10 per cent and about 730,000 passengers will fly yearly between the two countries by 2014.

British Airways, Lufthansa, Emirates, Air India and Air France-KLM are the top five airlines on the India-US route (including indirect flights), say industry experts.

"With addition of capacity on the West Asian routes, there is bound to be increased competition among airlines to gain incremental transit passengers. A significant part of the outbound traffic from India travels onward to US and Europe and given the high margins per passenger on the route, a fare war is imminent. The passenger however would look at quality of in-flight service, on-time performance and brand reputation also other than just price", said Amber Dubey, Partner and Head-Aerospace and Defense at global consultancy KPMG.