Air India to reduce fares from Jan 1

NEW DELHI: A day after Kingfisher Airlines announced a fare cut, national carrier Air India on Monday announced a similar fare reduction from Jan 1.

"In view of the slackening demand in post-peak season and continued decline in fuel prices, Air India will be adjusting domestic fares downwards on various sectors shortly," an Air India spokesperson said here.

The spokesperson, however, did not divulge the quantum of fare cut, saying it was still being worked out. "We would be able to come with reduced fares by January 1," he said.

Private air carrier Kingfisher Airlines on Sunday said it would cut fares from the new year.

Kingfisher chairman Vijaya Mallya said in a statement that the airline would begin the new year on an aggressive note by slashing fares. But he did not quantify the reduction either.

Low cost carriers are also expected to follow suit, said an industry official.

Despite the fall in fuel prices, Indian air operators have been unwilling to cut fares, demanding that aviation turbine fuel (ATF) be brought under the "declared goods" category, which would bring down sales tax from an average of 32 percent at various airports to a uniform 4 percent.

The proposal is now before parliament.

Sales tax varies from 4 percent to 32 percent, and accounts for over 35 percent of operational costs of airlines.

Last month, Jet Airways chairman Naresh Goyal said at a function here that he did not favour fare cuts as long as the aviation fuel was not classified as a declared good.

However, air operators started cutting fares following pressure from the government, especially as aviation fuel costs have been slashed, with civil aviation minister Praful Patel urging air carriers to pass on the benefit to travellers.

The lean season ahead also forced the issue for operators.

State governments are likely to oppose the uniform taxation policy as it would lead to revenue loss due to lower sales tax collection.

Over the past four months, there has been a sharp decline in aviation fuel prices. While some air carriers earlier this month reduced the fuel surcharge on the ticket price by Rs.200 to Rs.400, they did not touch the basic fare.

Oil companies have reduced aviation fuel prices seven times since September. The fuel is now sold at Rs.32,691.28 per kilolitre in Delhi after prices were slashed by Rs.4,208.37 in the first week of December.