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Global Economics

India Pressuring Airlines to Cut Fares

The government wants Kingfisher and Jet, the country's two largest private carriers, to lower ticket prices after a plunge in demand

MUMBAI: India's two largest private airlines, Kingfisher Airlines and Jet Airways, are contemplating another round of fare cut. After reducing fuel surcharge by Rs 550 per ticket last month, both the airlines are likely to reduce basic fares by Rs 600 per ticket in January, industry sources said.

Sources said Kingfisher has called a meeting on Saturday (December 20) to discuss the exact amount of fare cut. Chairman Vijay Mallya and all top officials are expected to attend the meeting. Sources said Jet Airways, which has an operational alliance with Kingfisher, may also take a similar decision.

When contacted, a Kingfisher Airlines spokesperson told ET: "I don't want to comment anything on fares at this juncture. But a meeting has been called to discuss on airfares this week. If any fare cut decision has to be taken, then company will inform to its customers at the right time."

A Jet Airways spokesperson denied any such plan contemplated by the company. "No decision on fare cut has been taken yet. Moreover, the government and ministry can't impose fares on Jet Airways as it's an internal company matter," she said.

The aviation ministry is mounting pressure on these two airlines as it wants them to pass on the benefits of a series of measures announced by the government to bail out the beleaguered industry.

On Monday, aviation secretary met Jet and Kingfisher heads, reportedly asking them to take appropriate measures. The secretary met the top honchos of Air India on Tuesday. The civil aviation minister Praful Patel said Air India has assured of a fare cut.

The aviation turbine fuel (ATF) prices fell again on Monday, the seventh time in the past three months, to reach its 36-month low. It is now quoted around 55% lower than August high of $147 a barrel. ATF accounts for nearly 45% of an airline's operating costs.

Analysts believe that fare cuts would bring back travellers. The plunging domestic air traffic has hit a record low this November with just 3 million people taking to the sky as compared to 3.8 million last November — a whopping drop of 21.3%.

The Jet Airways stock rose to 4.88% to close at Rs 155.95 on Tuesday in a strong market. The Kingfisher stock also jumped 5% to close at Rs 32.20. Jet and Kingfisher are losing money because of falling passenger traffic.

Jet reported its worst quarterly performance in more than three years, suffering a net loss of Rs 384 crore in the September quarter against a net profit of Rs 28 crore in the year-ago period. Kingfisher reported a 90% increase in its net loss to Rs 48.3 million.

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