Air India has triggered a price war in the domestic skies.For the peak summer season, starting May, the airline is offering fares that are up to 15 per cent less than what low-cost carriers are quoting.
This has been prompted by its new strategy to raise the passenger load factor to over 80 per cent and regain lost market share. Air India is at the number four slot in market share (15 per cent), behind Jet, Kingfisher and IndiGo. SpiceJet is close behind, with a 14 per cent share.
At present, Air India's PLF is in the 60s, the lowest among all airlines. The industry average is 75-80 per cent.
"We've cut fares in our lowest buckets, so that we come across as the cheapest option when customers compare fares. The aim is to increase PLF and fill more seats," said a senior AI official.
In various sectors, AI's PLF is less than 50 per cent. With this price cut, it would go up to 80 per cent, said the official.
LCCs say the move is a matter of concern, especially at the start of the peak summer season. "Fares falling to this level is a matter of concern.
"We have not yet taken a call on cutting fares. We will wait for some time before doing so, but this price war may spoil the coming peak season," said a senior executive of SpiceJet, an LCC.
This comes at a time the sector is already under pressure of high crude oil prices.
"Bringing down fares to levels lower than what LCCs are offering will definitely force them to cut prices. But I am not sure whether the full-service carriers will budge," said Rajji Rai, the president of the Travel Agents Federation of India.
Others say only AI can afford to bring down fares to such a level. "I do not think we will respond, as we are already low-priced," said a GoAir spokesperson.
AI is the largest airline in the country in terms of fleet, but this does not reflect in the number of passengers carried. The carrier has accumulated losses of Rs. 15,000 crore (Rs. 150 billion).
It lost Rs. 2,226 crore (Rs. 22.26 billion) in 2007-08, Rs. 7,189 crore (Rs. 71.89 billion) in 2008-09 and Rs. 5,551 crore (Rs. 55.51 billion) in 2009-10.
