Airline passengers may not benefit from Indian Oil's fuel price cuts
6 September 2007

Airfares are unlikely to come down despite a drop in jet fuel prices. Indian Oil, the largest supplier of jet fuel in the country, reduced prices by about 2.3 per cent on Friday 31 August, from Rs39,059.45 per kilolitre to Rs38,163.23 per kilolitre.

However, most of India's domestic airlines are consolidating their operations and looking to raise more money to support an aircraft acquisition spree, say analysts, and are in no mood to pass on the savings to passengers.

The price wars between competing airlines is finally slowing down, thanks to the recent consolidation in the industry. Jet Airways took over Air Sahara (now JetLite) and UB Holdings, which runs Kingfisher Airlines, bought a majority stake in the country's largest low-cost carrier, Air Deccan.

Consequently, two of the most aggressive price cutters are now in larger airline groups that don't easily resort to price wars. In fact, Air Deccan has announced it will substantially raise its fares in the next few weeks.

Without the pressure of matching prices, carriers like SpiceJet, Kingfisher Airlines and Jet Airways are unlikely to reduce fares.

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