labels: industry - general, economy - general, aviation, railways
Rail Budget: Impact on low-cost airlinesnews
24 February 2006

Railway minister, Lalu Prasad Yadav had some good news for the Indian population in this year's Railway Budget. He announced an 18 per cent cut in 1st class AC, and a 10 per cent cut in 2nd class AC passenger fares. He also said that 55 new trains will be launched in the next fiscal.

Further he said that there will be no increase in passenger and freight rates. Since the past one-year low-cost airlines have been in action, and have tried to offer travellers attractive prices, so as to give them a better and time saving alternative to railways.

While the Railway Minister may have made passengers happy with the decision to cut fares, low-cost airlines may take the hit, as they will now be compelled to realign their prices with those of the railways.

However, the managements of these low-cost airline carriers have a different story to tell.

Director at Spice Jet, Ajay Singh claims that there will be no negative impact of passenger fare cuts on them.

He says, "We do not think that people will move to railways from airlines like ours. The Railway Minister's move today is very welcome. The cut in fares will stimulate the travel market on the whole. Many more people will start travelling."

He adds that, they will align their fares with that of railways. "This is something we have always done and we will continue to do this. So if they drop 2nd AC or 1st AC fares, we will try and respond to that by keeping our fares competitive," says Singh.

In addition he says that airlines have an added advantage of saving time, "We can take passengers from Delhi to Chennai in two hours versus the 36 hours taken by a train. We take passengers from Delhi to Mumbai in less than two hours."

MD of Deccan Air, Captain Gopinath, asserts that they will not bring down their fares following the rail fare cut.

He says, "Railways will never be able to bring down the travelling time. They can only bring down fares. We are not going to bring down the fares any further only because railways have brought it down. So we continue to focus on improving our efficiency and bring down costs."

He is still confident that people would not mind paying extra for air travel. He says, "Since people save time with air travel, I don't think people would mind paying 25-30 per cent more and travel by air."

According to Jeh Wadia, managing director of GoAir, "At GoAir we remain committed to making flying affordable to all Indians. Pricing is dynamic in this industry and we will price our flights based on our competition — both other airlines as well as other means of transport like the railways."

While the fare tussle between railways and low-cost airlines continues, the traveller seems to be the ultimate winner.

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Rail Budget: Impact on low-cost airlines