Sky opens to price war

Within weeks of Jet Airways and Air Sahara receiving the government's permission to launch international services, leading foreign airlines have dropped fares by over 40 per cent on prime routes from India.

In December 2004, the government gave permission to the two carriers to fly to destinations in the Far East and Europe. Since then, Singapore Airlines, British Airways and Sri Lankan Airlines have cut fares.

On January 25, British Airways announced that a ticket from London to Mumbai would cost only Rs 10,000 compared with Rs 14,750 earlier. Singapore Airlines last week cut prices between Singapore and any destination in India by 43 per cent to Rs 13,100.

The latest to join the bandwagon is Sri Lankan Airlines, which, a few days back, cut fares to major global destinations by 50 per cent, a return ticket to London now costs Rs 14,190.

Every year around this time there is a fall in outbound traffic because of school examinations. To cope with this, airlines have lowered fares till the end of March.

They hope to make up for lower fares with increased traffic. But there are indications that these cuts will be extended.

"The market is changing. We will have to look at various ways, including fares, to face the new competition," said BK Ong, general manager (India), Singapore Airlines.

"We have to react to the market now with private Indian carriers also planning to fly on these routes," added M Fazeel, regional manager (Asia-Pacific), Sri Lankan Airlines.

A British Airways executive said the airline would look at cutting fares once the private Indian carriers started flying.

Even Air-India is expected to cut fares for some of the flights to the US and Europe soon.

These routes are among the international sectors the government has opened up for domestic private carriers. While Jet Airways and Air Sahara are expected to fly to Hong Kong, Singapore and Kuala Lumpur by Marchend, they will launch services to Europe in mid-April.

Jet Airways is slated to start flights to the US in April.

On their part, the Indian private carriers are not happy with the price cuts and are expected to introduce very low fares to challenge rivals.

"It is true that these carriers have dropped prices just after we got permission to fly overseas. We may offer tickets at par or lower than the existing fares. We are prepared to meet the fare cuts by these existing players," said an Air Sahara executive.

There are indications that the battle will extend to other areas as well. In January, Malaysia Airline started offering holiday packages, which included tickets to Kuala Lumpur from new routes in India.

Cathay Pacific has come out with a scheme that will allow passengers a free three-night stay in Hong Kong on the purchase of a ticket from Mumbai or Delhi to Hong Kong, South Korea, Japan, China, Taiwan, the Philippines, Australia and New Zealand.

Some international carriers have also come out with massive incentive linked bonus schemes for travel agents.

Meanwhile, on the Gulf routes, Etihad and Air Arabia are locked in a price war. While Etihad is offering a return ticket to Dubai for Rs 11,125, Air Arabia is offering a ticket to the same destination for Rs 6,000.

This is bad news for Air India Express, the low-cost arm of Air-India, which is hoping to start services to Dubai in April or May.