Feb 6, 2009

Business - Kingfisher feels fare war may ground industry

Nirbhay Kumar

NEW DELHI: The raging war on tariff in the Indian skies is now pitting full-service carriers against low-cost airlines with at least one player,
Kingfisher Airlines, alleging that the race to the bottom would leave the industry grounded. Kingfisher has voiced its concerns to the government through informal channels against budget carriers SpiceJet, IndiGo and GoAir for bringing down tariffs to “unrealistic levels,”said a top company executive. Currently, a typical Delhi-Mumbai ticket that costs around Rs 3,500 in a full-service carrier, comes around Rs 1,000 cheaper in the budget airlines. “These fares would spoil the sector and leave the industry sick. We have taken the issue at every level. Besides informing the ministry of the unwarranted development, we have also discussed the issue in the Federation of Indian Airlines (FIA) meeting,” the Kingfisher official, who didn’t wish to be named, told ET. However, the argument doesn’t wash well with no-frills players. “It’s actually the full-service airlines which have lowered fares to unrealistic levels. If they claim to be five-star or seven-star airlines of the country, I don’t know why they are selling tickets at dhaba rates,” said an official with a budget airline on condition of anonymity. When the fuel price reached its peak in August last year, all the airlines under the banner of FIA had flocked to the government for a bail-out package. Considering the poor financial health of the airlines, the government announced relief measures such as extended credit period to clear fuel bills to public sector oil companies and removal of customs duty on jet fuel. Domestic carriers together lost Rs 4,000 crore in 2007-08, mainly on account of high aviation turbine fuel (ATF) price, predatory pricing and excess capacity. Airlines are expected to post an accumulated loss of Rs 8,000 crore in the current financial year. Following a 54% fall in ATF price since September last year, airlines have again adopted an aggressive pricing strategy. “We increased fare by 30% some days ago, but no other airline followed us. This forced us to revert to the same comparative fare level. As of now, fares have come down by 50% as compared to fares a few months back. At this yield, it requires 100% flight occupancy to become operationally profitable. We think all the airlines are equally responsible for the recent development,” SpiceJet CEO Sanjay Aggarwal said. Despite the overall slump in air passengers, budget carriers have been hiking their traffic at the cost of full-service carriers.

1 comment:

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