MUMBAI (Reuters) - India’s loss-making carriers are swallowing a 37 percent cut in jet fuel prices in relief, but wary about sparking demand through another round of fare cuts, are instead offering discounts and freebies to attract fliers. State-run oil companies have slashed aviation turbine fuel (ATF) prices by up to 2,100 rupees per kilolitre and a 5 percent customs duty was scrapped.

ATF prices, as offered to domestic airlines in Mumbai, have fallen nearly 37 percent to 46,518.85 rupees a kilolitre from a high of 73,673.56 rupees a kilolitre in August.

Budget airline SpiceJet is offering up to 15 percent discount on advance bookings and has also withdrawn a congestion charge, a fee to cover additional flying time due to heavy traffic at airport terminals.

“We are evaluating what we have to do now to increase demand, it will take a month for us to see the impact of the pricing changes we have made,” said SpiceJet’s Chief Commercial Officer Samyukth Sridharan.

The state-run Air India is giving a “companion free offer” for fliers to the U.S., Canada and Europe, and Kingfisher Airlines is offering a complimentary ticket to London for every four return flights within India.

The fuel price cut is estimated to save about 3.5 billion rupees a month, an official of an airline said.

The industry is still looking at losses to the tune of about 80 billion rupees for the year to March 31, 2009, said Kapil Kaul, Chief Executive, India and the Middle East for the Centre for Asia Pacific Aviation. 

“We can look at about 15-20 percent savings on operating costs for the industry every month.”

But it is not something fliers are benefiting from in a hurry.

TRIMMING LOSSES

“We have accumulated losses over a period of time as we did not pass the full financial impact when fuel was rising. If we were to immediately pass on the benefits how would you liquidate the losses?” said Jitender Bhargava, executive director of corporate communications at Air India.

High ATF prices and slowing passenger traffic in July and August led top domestic private carrier Jet Airways and Kingfisher Airlines to post losses for the quarter ended Sept 30.

Kingfisher Airlines’ seat factor contracted by about 6 percent in the quarter from a year earlier. Jet, whose domestic seat factor rose marginally to 66.9 percent from 66.3 percent a year earlier, has said it expected a slowdown in demand growth over the next few quarters.

Analysts say aligning the capacity of seats and infrastructure would also help in meeting falling demand, following a code-sharing agreement between Jet and Kingfisher.

“Jet and Kingfisher are controlling two thirds of the market now, the only option the smaller airlines would have is to join foreign carriers to exploit the domestic market,” said Hikmat Mahawat Khan, management consultant at Netherlands-based Centre of Excellence Aviation, Capgemini Consulting.

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