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Airlines slash fares to prop up demand in India

Many international airlines flying from India have slashed fares drastically this summer in a bid to lift demand hit by stock market turbulence and a massive earthquake in Gujarat, trade officials say.

The airlines have cut fares, mostly on the busiest and most lucrative London and New York sectors, by as much as 40 per cent, turning the market into a bargain hunters' delight.

A two-way economy class ticket to London is down to Rs 18,000 on British Airways and United Airlines, Rs 19,000 on Virgin Atlantic Airways and Rs 20,000 on Air-India. All three airlines were charging Rs 30,000 on this route last year.

Malaysian Airline System and United Airlines are offering return fares to San Francisco and New York for just Rs 36,000 compared with Rs 50,000 last year.

"We started a Friday flight to London a fortnight ago for weekend traffic. Our price was Rs 20,000 for a two-way journey. Next day, our competitors undercut us," said an Air-India official.

Despite the huge cuts, travel agents say demand has failed to take off due to the devastating earthquake in the western state of Gujarat in January, uncertainty gripping the stock markets and a slowdown in the US economy.

"A big chunk of Indians travelling abroad is made up of Gujaratis. After the earthquake, the Gujarati segment got particularly affected," said Subhash Goyal, chairman of the Stic group of companies.

"With so much money being lost in stock market scams, another big clientele of brokers and traders has also been lost," he added.

A series of financial scandals have rocked the Indian stock market this year, sharply eroding equity values and investor sentiment.

Goyal estimated the airlines were filling just 50 per cent of their flights out of India this season. Travel agents say foreign airlines in the country offer roughly 11 million seats a year.

"Demand is lower then last year, while supply of seats has gone up. There are roughly 5,000 seats a week extra from last year," said S K Dewan, managing director of Dewan Travels.

The number of seats have gone up in the past year because of new entrants and an increase in frequencies by existing players.

United Airlines started a double daily service from New Delhi to London and Hong Kong in April.

Dubai's Emirates, Cathay Pacific and Malaysian Airline have added between four to eight flights a week.

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