Air fares in India fall in time for New Year

Air fares have finally begun their descent to more reasonable levels this holiday season. On Saturday, Vijay Mallya-owned Kingfisher and low cost carriers — IndiGo and SpiceJet — decided to follow Jet and Air India in cutting fuel surcharge for domestic flights.

While full service carriers have dropped surcharge by Rs 400, LCCs — that had not raised them in last two rounds of jet fuel price hikes — have also reduced by Rs 200 to Rs 300. Now all Indian carriers, whether full service or low cost, have uniform fuel surcharge: Rs 1,950 for short flights and Rs 2,700 for those over one hour flying time.

LCCs like IndiGo and SpiceJet and AI (domestic) don't charge the congestion fee of Rs 150 that Jet and Kingfisher do. In fact, with the difference in fuel surcharge gone, LCCs would be under pressure to cut basic fares. They are looking at re-introducing attractive advance booking fares to stimulate demand. At present, full service carriers' fares are about 20% higher than LCCs and the latter want this gap to be 25-30% to be significantly cheaper.

The airlines' worst fears are coming true as the combined impact of economic glut and terror alerts has cast its shadow on passenger numbers in the ongoing peak travel season. The number of fliers is going to further drop from January to March (traditionally the leanest travel season). "We have to stimulate demand by attractive fares," said SpiceJet director Ajay Singh.