Airlines cut business class fares

Faced with a 10 to 15 per cent fall in passenger traffic, business class travel is coming down to earth. For the first time, Jet Airways and Paramount are introducing apex (advance purchase) fares and Kingfisher and state-owned Air India are offering free travel for spouses to boost bookings for this premium service.

Much of the hit is a result of corporate cost cutting, with senior executives now increasingly travelling economy class on domestic routes. Business class tickets are about three times an economy class ticket.

"Since the financial meltdown in the US and Europe, we have seen companies in India tightening their belts. From September onwards, we have seen a fall in premium travel within India," said Raj Sivakumar, vice president, revenue management, Jet Airways, India's largest private airline.

In response, the airline launched an apex offer January 5, applicable to 60 flights, that are 30 to 35 per cent lower than normal business class fares.

The three-day apex fares range from Rs 7,900 to Rs 8,100 (one-way), the five-day apex fares range from Rs 6,500 to Rs 11,500 and the seven-day apex fares from Rs 4,500 to Rs 17,500 depending on the sector. 

"We are looking to not just pump up the loads, but also to get less price-sensitive economy passengers to fly business," says Sivakumar. He claims the airline has seen a five to 10 percentage point increase in premium traffic since the scheme began.

But even all-business carrier Paramount Airways has announced apex fares and a scheme under which passengers can get a complimentary ticket for a companion for Rs 750 in January.  

"We've managed to increase our market share from 26 to 28 in South India in 2008. After the slowdown, companies were finding our product even more attractive as ours is a business class product with high-end economy fares," said M Thiagarajan, managing director, Paramount Airways.

Air India was among the first off the block, announcing a spouse-plus offer December 31 for executive class passengers on the domestic routes.

The scheme, on offer between January and February, allows business class passengers to take spouses along by paying only the passenger service fee (paid to the airport authority) and airport user development charges on select routes.

The airline has sweetened the deal with a free-stay for the spouse at select Taj properties. The Indian flag carrier is also looking to aggressively market its coupon schemes for corporate travelers that offers corporate houses a 15 per cent discount.

Meanwhile, Kingfisher Airlines, which has seen its passenger load factor in business class at 35 per cent to 40 per cent in the last few months, is planning a free-companion offer on domestic routes. It has also introduced a 12-coupon offer on its domestic business class that comes tied with the possibility of winning a business class ticket to London and back through a draw of lots.

Business class typically accounts for 50 to 60 per cent of an airline's revenue. "The drop in business class passengers is bound to get the airlines worried as it's the business class tickets that give them the power to price lower in economy," said Kapil Kaul, CEO-India subcontinent & Middle East, Centre for Asia Pacific Aviation.

The move to cut fares in business class takes place even as airlines have cut economy fares.  "We have seen about 25 per cent of the business class traffic shift to economy over the last six months," said  Anoop Kanuga, chairman-western region, Travel Agents Association of India.