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AI cuts fares under govt fiat

BS Reporter  |  New Delhi 

Jet, Kingfisher rebuff Praful Patel, budget carriers reduce fares.

Civil Aviation Minister Praful Patel has asked state-owned airline Air India to cut fares, an act that would put pressure on leading private carriers like Jet Airways and Kingfisher Airlines to follow suit.

As of now, though, the two private airlines remain steadfast in their refusal to cut fares even as Patel’s pleas acquire a hint of aggression.

People tell me that I run a liquor business and also I run an airline. I tell them, both make you fly.
Vijay Mallya, Chairman, Kingfisher Airlines 
(on which business gives him a high)
You (Jet and Kingfisher) want a regulatory mechanism… Both of you are byproducts of deregulation… Let me assure you that de-regulation shall continue to be the hallmark of government policy whether Mr Mallya and Mr Goyal like it or not.
Praful Patel, Civil Aviation Minister
Thank you, Vijay, but you can live on the liquor.
Naresh Goyal, Chairman, Jet Airways (to Mallya, who seemingly endorsed Patel’s views on reducing fares)

Asked whether the government had directed Air India to reduce fares, Patel, speaking at the HT Leadership summit in New Delhi, said: “Air India does not have to behave like the other two carriers (Jet and Kingfisher). It is a responsible, government carrier. If oil prices have come down, so should fares.” He said fares would come down from December.

Air India has 18 per cent share of the domestic market, while Jet and Kingfisher together control 55 per cent.

The government recently bailed out airlines with sops and extended their deadline to pay over Rs 2,000 crore in dues to oil Today, Patel said the government would infuse Rs 1,200 crore as equity in Air India. Aviation turbine fuel (ATF) prices have fallen 45 per cent in the last four months through a number of reductions, raising a clamour for fare cuts.

While asking for a fare cut, Patel said the majority of the Indian market was looking for competitive fares. “Whatever little benefit has been given by the government must reflect in lower and better fares. Otherwise, public and government sympathy for your cause will go.”

Air India responded to Patel immediately. “Please wait and watch. There will be an announcement (of a fare cut) very soon,” said a spokesperson for National Aviation Company of India Ltd, which owns Air India.

But the two leading private airlines rebuffed Patel. Jet Airways Chairman Naresh Goyal said: “I don’t want to close my company down. We invite the minister to check our accounts and see if any money is being wasted. If the minister wants, we will decrease fares, but my company has to be profitable.”

Patel retorted: “Both of you (Jet and Kingfisher) are byproducts of de-regulation and let me assure you that de-regulation shall continue to be the hallmark of government policy, whether Mr Mallya and Mr Goyal like it or not.”

Vijay Mallya, the chairman of Kingfisher, which recently forged a strategic alliance with Jet to rationalise their operations, echoed Goyal’s sentiment. “We know that if fares can be more attractive, it will make more people fly. However, the single fact that has lead to losses for airlines is the high tax on ATF. We also have to cope with the depreciation of the rupee. We have infrastructure bottlenecks and there are still delays which lead to additional consumption of fuel,” said Mallya.

Low-cost airlines have already, quietly, cut fares by doing away with the congestion surcharge and also through a cut in basic fares. Says a senior executive of low-cost carrier SpiceJet: “We have already decreased fares by 15 per cent to 20 per cent, which includes (a cut in) the basic fare.”

Mallya’s low-cost brand Kingfisher Red (earlier Air Deccan) and Goyal’s JetLite (earlier Air Sahara) have only cut the congestion surcharge, which is Rs 150.

First Published: Sun, November 23 2008. 00:00 IST