ChEaP air FARE war

National carrier Air India's promotional scheme offering reduced fares has triggered a price war among airlines, bringing cheers for holiday travellers.




Airfares have dropped sharply on most routes as airlines compete to woo vacationers.



"Fares would have been at least 25-30% higher if Air India had not dropped fares drastically, a race that all airlines have joined," said Sunny Sodhi, vice-president (air product) at online travel company Yatra.com.



Air India had launched the promotional scheme earlier this month to make up for the crippling effects of a 10-day pilots' strike it has emerged from.

The sharp fall in ticket prices has belied expert forecasts of a steep rise in fares during the peak summer holiday season.




Tickets are hard to find between May 15 and June 20 when most schools in the country are closed for the annual summer break. The high demand and limited availability of seats leads to costlier tickets.



In contrast, tickets this season are going south. For example, a one-way ticket from Delhi to Amritsar for travel on May 27 is available for 1,600 now. Tickets on this route are priced 5,000 onwards for most of the year.



The starting fare on the Mumbai-Jodhpur route is 6,800, a sharp fall from 10,000 in December for tickets booked 10 days ahead of departure.



Even tickets from Delhi to Thiruvananthapuram, considered a heavy tourist route, are available for 6,000--a 20% fall from the price last summer.



Some industry experts say a capacity addition by four airlines has also contributed to the fall in fares.



Fares are also on the lower side as IndiGo, SpiceJet, Jet Airways and Kingfisher Airlines have increased capacity by over 20%, said Ankur Bhatia, executive director of Bird Group, a travel technology conglomerate.



Manish Chheda, managing director of consultancy firm Auctus Advisors, says capacity addition is the only reason for the low fares.



"Since more capacity has been added to several routes by many airlines, it is more a question of filling up that supply than having lesser loads. Hence, lower fares," he said.



Sodhi of Yatra.com says cheaper tickets are encouraging people to travel by air, which is reflected in a 30% jump in bookings in May as against the industry expectation of a 10-18% increase in the month.



"Domestic bookings are showing strong growth in May and we expect the demand to peak in early June," said Aloke Bajpai, chief executive of travel portal iXiGO.com. Some sector analysts, however, see a dark side to the airfare war.



"Airlines have fixed costs of 60-75%, which means they have limited flexibility to play around with ticket pricing," said Amber Dubey, director (aerospace & defence) at consultancy firm KPMG.



This is a period when airlines can make enough money to offset the impact of flying half-empty aircraft during lean seasons, he added.