ATF cut prompts airlines to cut fares

New Delhi: Domestic air travel has become so competitive that within hours of oil companies announcing a cut in air turbine fuel (ATF) by 10 percent, or by Rs 3,200 per kilolitre, a number of budget carriers immediately announced fare cuts. Not only this, state owned carrier Indian Airlines is also gearing up to battle the budget airlines as well.

Following the cut in ATF, budget carrier SpiceJet said it would cut fares by about 2 per cent while Air Deccan also said it would pass on the benefit though it did not specify the fare cuts. Air Deccan is working on details of the reduction and will announce them shortly. According to GR Gopinath managing director Air Deccan, "The benefit in cost that the airline will derive by reduction in prices of ATF, will be passed on to the passengers."

With budget carriers announcing further cuts to already rock bottom fares, full service carriers may be set to face a tough challenge unless they take drastic action.

Indian Airlines has already announced a 20 per cent fare cut on routes where the budget carriers are strong while Jet Airways and Air Sahara are expected to follow suit.

Carriers like SpiceJet and Kingfisher Airlines are talking to oil companies to know their long-term pricing strategy since they cannot change fares every month. Aviation officials say it is not immediately clear how long ATF will be available at reduced rates.