One week after doubling fares, low-cost carriers cut them

Low-cost carriers SpiceJet, IndiGo and GoAir have cut fares sharply, just a week after they abruptly raised these following a 20 to 25 per cent slump in sales.

The effective cut in overall fares, (including taxes and surcharges) comes to above 20 per cent. Industry sources said full-service carriers Kingfisher and Air India are expected to follow. Jet Airways has already introduced several special fares after the government and the monopolies watchdog raised strong objections to the airline-wide price rise last week.

This is the third time fares have been changed substantially (either upwards or downwards) since December 2008. In the second week of January this year, airlines cut fares almost 50 per cent, hoping to increase loads which had fallen as low as 65 per cent in December 2008 and to pass on the benefit of a cut in fuel prices.

Then, in the first week of February, airlines increased lower-end fares over 100 per cent, saying the price cut had not led to a major increase in the loads. However, industry sources say ticket sales saw a 20 to 25 per cent slump as a result of higher fares this week, forcing them to revert to lower fares.
 

BUMPY FLIGHT PATH                          (in Rs) Fare revisions by domestic airlines
	1-Dec	26-Jan	10-Feb	18-Feb
Low cost carriers
Mumbai-Delhi	4811	2369	5095	3900
Delhi-Bangalore	5354	2717	5332	4290
Delhi-Hyderabad	4946	2602	5000	3988
Full service carriers
Mumbai-Delhi	5282	3349	5600
Delhi-Bangalore	5954	3164	6749
Delhi-Hyderabad	5592	3653	5800

“The price cut was actually expected since the overall domestic market had shrunk and the leisure travel segment had been affected. So this is good news for the customers,” said Noel Swain, VP (marketing) for travel portal cleartrip.com.

Added Bhawna Agarwal, co-founder, Yatra.com: “Carriers had seen good advanced bookings for February and March when they had reduced fares in January. However, their revenues for January had gone down. That is why they thought it prudent to increase fares for higher revenues. But when sales saw a major slump again, they had to decrease it, which is what they have done today. Also, you must remember that Jet Airways had already gone back to low fares in some select sectors.”

Interestingly, unlike last time when airlines simultaneously raised fares, this time the full-service carriers seem to have adopted a “wait and watch” stance before going in for a fare cut. Civil Aviation Minister Praful Patel had come down strongly against the fare increase, even as the Directorate-General of Civil Aviation wrote to the airlines, inquiring about the details of the sudden move. Anti-monopoly watchdog Monopolies and Restrictive Trade Practices Commission had also ordered a probe into fare rise, which was seen in the industry as a case of price fixing.