Jet triggers another fare war

Air travellers could be treated with another round of fare cuts, as the country���s leading full service carriers take a fresh aim at the budget airline space amid worries about the deteriorating financials of the industry.

The country���s oldest private carrier Jet Airways, which already operates a wholly owned low-cost airline JetLite, has launched another low-cost service JetKonnect, while Kingfisher Airlines is increasing the number of flights on low-cost Kingfisher Red routes. There are early indications that the country���s largest budget airlines��� IndiGo and SpiceJet ��� will respond aggressively to the development.

���Given our cost structure, we can go down even further. Our assessment is that the introduction of this low-cost airline by Jet will increase the gap between revenue and cost further,��� said an IndiGo official, requesting anonymity.

The cost difference of operating a lowcost carrier and a full service carrier is to the tune of 30%. While Jet has started offering low fares, it has not reduced its cost except that of free meals on board. Their distribution cost, manpower cost and expenses of maintaining the aircraft are still the same, the IndiGo official said.

Jet, however, disagrees. The cost difference of operating low-cost and full service airlines are not more than 10-15 %. It hopes to play on the volume game and maximise its revenue by increasing the number of passengers and seats. An alleconomy class configuration gives airlines more seats on each flight, Jet Airways vicepresident
(revenue management) Raj Sivakumar said.

SpiceJet chief commercial officer Samyukta Sridharan said it���s too early to react to the development . ���They (JetKonnect) are still selling tickets at higher rates than ours. We have to wait before taking any step,��� he said. Domestic airlines are suffering huge losses on account of excess capacity , irrational pricing and underutilisation of resources. The losses for 2008-09 are estimated to be about Rs 10,000 crore.

While a JetKonnect ticket from Mumbai to Ahmedabad for May 20 can be booked at Rs 3,128 (inclusive of taxes and surcharge) through its website, SpiceJet and Indigo offer tickets for the same date and sector for Rs 2,479. ���We are doing what we believe is right for customer and shareholders. We believe that LCCs would not engage in a fare war that would go against the interests of the industry. Depending upon further development , we would act accordingly. We will take appropriate measure to keep our revenue flow intact,��� Mr Rajkumar said.

Jet Airways last week introduced an all economy service JetKonnect in the budget segment. Another full-service carrier, Kingfisher Airlines, is replacing more of its premium service flights with no-frill Kingfisher Red service. The airline will, however , provide meal on board without charging additional cost.