Budget carriers may slash fares around 15 November

Mumbai: With falling fuel prices and a proactive central government taking the initiative to provide relief where it can, it is likely that the country's low-cost carriers may try and recoup lost ground by slashing fares by up to 10-15%. Domestic LCCs SpiceJet, IndiGo and GoAir were impacted the most by the recent downturn in the sector with customers opting for cheaper modes of travel, such as railways.

The decision to lower fares comes in the wake of the decision by oil marketing companies to slash aviation turbine fuel (ATF) prices and also the decision by the government to withdraw the 5% Customs duty on jet fuel.

In the light of these developments it is being given to understand that the LCCs too have taken an in-principle decision to slash fares and pass on the benefit to customers. An appropriate announcement may be made anytime over the coming days, probably around 15 November.

Meanwhile, state-owned oil firms once again slashed ATF prices by up to Rs2,100 per kilolitre on Monday night and it is likely another cut in ATF prices may be made on 15 November.

There has now been a 20% reduction in jet fuel prices over three days.

Between them the three LCCs control one-fourth of the domestic market. If the prosed cuts do materialise a Mumbai-Delhi ticket by SpiceJet, IndiGo and GoAir for non-peak hours will cost around Rs3,800, including taxes, as compared to Rs4,475 at present.

By comparison, fares from full service providers, Jet, Kingfisher and Air India for the same sector cost around Rs7,237, Rs5,838 and Rs6,594, respectively.

With fuel costs constituting 50% of the operating costs of airlines, recent cutbacks effected by the  government and oil companies would alleviate conditions considerably. Any reluctance by carriers to slash fares may overlook the fact that load factor has been severely affected, falling from 75% a year ago to around 45% now.