Air India has decided to reduce fuel surcharge on all domestic flights by Rs 400 with effect from Tuesday. This 14.5 per cent reduction in surcharge will lead to an around 9 per cent cut in the overall ticket prices. Currently, the fuel surcharge stands at Rs 2,350 for sectors below 750 km and Rs 3,100 for those over 750 km.

The reduction in ATF prices from September 2008 onwards including the one announced for December has reduced the ATF prices by nearly 50 per cent..

"Domestic air travel demand has been sluggish in recent months and the reduction in fuel surcharge is expected to stimulate domestic air travel market during the winter peak season," said a company statement.

Apart from Air India, Kingfisher has also announced it would reduce fares. "Although crude prices are still volatile, we hope it will stabilise at the current levels so that there is a short to medium term relief in ATF costs.

This decision takes into account the reduced prices of ATF announced for the current month by the oil firms. While airlines are no doubt going through difficult times, it is necessary for us to react positively to pass on some concession to passengers," said Raghu Menon, CMD, National Aviation Company of India Limited, which owns the firm formed after the merger of Air India and Indian Airlines.