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Rs 2000 pinch as cheap air fares go

New Delhi, Feb. 10: Major airlines in India have scrapped low-price promotional fares, pushing the average cost of flying by Rs 1,200-2,000.

On most routes, they have scrapped the ticket baskets that offered basic fares of up to Rs 1,200 and, in some instances, up to Rs 2,000. This means the cheapest tickets on routes such as Delhi-Calcutta and Delhi-Mumbai will be over Rs 5,000 since taxes and surcharges account for about Rs 3,075.

The steepest hike of Rs 1,800-2,000 per passenger is expected on the Mumbai-Delhi sector.

Jet Airways, Air India and Kingfisher Airlines are among those that have decided to stop the low-fare advance purchase schemes, saying fares will now be decided by the market.

Even low-cost airlines like SpiceJet, Indigo and GoAir, which sold certain tickets at Rs 99 or less, will sell them at full base fare, plus taxes and fuel surcharge.

“We have discontinued our promotional fares as the response has not been very good, but people who have already bought tickets will enjoy the benefit,” an Air India spokesperson said.

SpiceJet CEO Sanjay Agarwal said the hike was “expected and essential”. He added: “Fares at which we had been selling our tickets since January were unsustainable. At those levels, it would have required us over 100 per cent load factor (the proportion of occupied seats) to break even.”

A Kingfisher spokesperson said: “We have closed low-fare buckets and are concentrating on selling higher-fare buckets.… Our focus is on revenue and not seat factors.” He did not cite any numbers.

Airlines have long debated whether to cut prices and fill up seats, or to price seats high and depend on a fixed clientele.

“Obviously, right now the low pricing was not helping. They had to increase yield per seat,” said Robin Pathak, an aviation analyst and former Indian Airlines director. “But that does not mean they will not drop fares again when jet fuel prices and a general economic recovery make it possible.”

With oil prices falling by over $100, carriers such as Jet, Kingfisher, Paramount Airways and Air India had offered up to 50 per cent discounts. Low-fare carriers such as GoAir, IndiGo and SpiceJet had announced steeper discounts, even charging only taxes and surcharges on a limited number of tickets.

The Centre for Asia Pacific Aviation, an aviation consulting firm, said these reductions, combined with a four-five percentage point fall in the January load factor, would result in losses of nearly Rs 9,740 crore for the airlines in the financial year 2008-09.

“All this meant that the business had to be re-invented. Traditionally, business class fares are double the economy class fares. After the recent reductions, they became four times the price of economy class fares,” said U.K. Bose, former Sahara Air CEO.

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