Bloomberg News

Jet Says Air India Fares a ‘Problem’ as Kingfisher Cut Flights

November 25, 2011

Nov. 17 (Bloomberg) -- Jet Airways (India) Ltd., the nation’s biggest carrier, said state-owned Air India Ltd. is compounding a price war that has caused industrywide losses and prompted Kingfisher Airlines Ltd. to cut flights.

“Air India is discounting fares and that’s absolutely a problem,” M. Shivkumar, senior vice president of finance at the Mumbai-based carrier, said by phone yesterday. “Ideally, fares should go up when oil-import costs go up. That’s not happening and that’s why airlines are in this situation.”

Jet and Kingfisher, the nation’s two largest listed carriers, have lost a combined 63 billion rupees ($1.2 billion) in three years as low fares and rising fuel prices offset surging passenger numbers. Air India has also been unprofitable since a 2007 merger, causing it to win 32 billion rupees of state bailouts and seek another 65 billion rupees before the end of March.

Air India’s “prices are determined by market forces,” K. Swaminathan, a spokesman, said by phone. Fares are submitted and approved by the Directorate General of Civil Aviation, he said. Every other airline in India also needs to file fares with the industry regulator.

Air India was charging 10,258 rupees ($202) for an economy class ticket to fly from New Delhi to Mumbai on Nov. 24 and return the next day, according to its website yesterday. Jet was charging 12,207 rupees for similar trip on the 874-mile journey, through an online promotion.

Loss Widens

Jet plans to sell and lease back some planes to repay $300 million of loans within six months, Shivkumar said. The carrier is in talks with suppliers on cutting costs, he said without elaboration. The airline’s second-quarter loss widened to 7.14 billion rupees, it said last week.

The company plans to expand operations at its budget unit as it adds four Boeing Co.’s 737 aircraft, Shivkumar said. That contrasts with Kingfisher, controlled by billionaire Vijay Mallya, which is abandoning the low-cost market to instead focus on full-service operations.

Jet rose 4.3 percent to 248.95 rupees at close of Mumbai trading yesterday. Kingfisher jumped 14 percent while discount carrier SpiceJet Ltd. fell 2.5 percent. All three stocks have fallen more than 60 percent this year.

In the first eight months of this year, Jet had 26 percent of the domestic market, including low-cost unit JetLite, according to data from the aviation regulator. Kingfisher and IndiGo, the biggest budget carrier, had 19 percent apiece, while Air India had 17 percent.

--Editors: Vipin V. Nair, Neil Denslow

To contact the reporters on this story: Vipin Nair in Mumbai at vnair12@bloomberg.net; Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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