carrier Air India's
move to lower fares by up to 20% on
certain routes since January this year
to prop up its falling market share is
making other airlines see red as they face the prospect of taking a hit on
their profits. Airlines are worried that the national
carrier's dash for market share has
come at a time when oil prices have
risen to record highs due to the Libyan
crisis, raising their operational costs as
much as 50% in some cases. " Air India is offering all their seats at
prices that are lying at the bottom of
the yield bucket. They are reducing
fares by as much as.`1,000 and
competing with us by dropping fares,
especially on the Delhi-Mumbai routes," said the CEO of a low-cost
airline who did not wish to be
identified. "A drop of .`100 in yield will
bleed airlines by .`3 crore." Despite having the largest fleet, Air
India was recently overtaken by low-
cost airline IndiGo in terms of market
share. The national carrier has a
market share of 15%. It has long
lagged behind Jet and Kingfisher , the two large sector airlines. Air India's
move has had some impact in
January-March 2011 quarter, say
analysts. "Air India has dropped fares in the last
quarter by 20%-30%. This forced
other airlines to follow suit. With fuel
costs up by more than 40%, this drop
in fares by Air India has become a
game changer for the fourth quarter of the last financial year," said Kapil
Kaul , CEO, (Indian sub-continent &
Middle East), CAPA. Air India defends the strategy by
saying that its market share has gone
up and it has become competitive.
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