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AirAsia's Rs 5 offer pushes rival carriers into turbulent skies

Saturday, 31 May 2014 - 6:20am IST | Place: Mumbai | Agency: dna

Low-cost carrier AirAsia India on Friday announced an unbelievable fare of Rs 5 on the Bangalore-Chennai, Bangalore-Goa routes, excluding airport tax and other applicable fees.

The company said 15,000 promo seats will be available for sale for immediate bookings on www.airasia.com up to June 1 for the travel period from June 12 to October 25, 2014.

Before this, the company had announced a fare of Rs 990 (including taxes) for its maiden Bangalore-Goa Bangalore-Goaon June 12.

This is less than what an air-conditioned bus ticket on the sector costs, which is a minimum of Rs 1,100.

The Rs 5 base fare offer, even with the addition of airport and other taxes, will still be lesser than Rs 990.

The fares announced by AirAsia India, a JV between Malaysian carrier Air Asia, Tata Sons and Arun Bhatia's Telestra Tradeplace, has taken the industry by surprise. This, however, is an introductory offer, the airline said.

AirAsia India's entry is expected to push air traffic growth, which has been sluggish over the past few years. However, according to experts, the highly competitive fares by the airline could further increase the financial challenges of existing carriers.

Both SpiceJet and GoAir responded with a fare cut on the same route. Spicejet, the country's second-largest low-cost carrier, came out with a promotional offer of Rs 1,499, excluding statutory taxes, on the Bangalore-Goa route, and Rs 2,058 (all inclusive) on the Bangalore-Chennai segment.

GoAir has matched the SpiceJet offer with a similar Rs 2,058 price tag.

Indigo and Jet Airways are staying away from the price war.

The Malaysian carrier had to wait for nine months to secure the Air Operating Permit (AOP).

With AirAsia India introducing the sub-Rs 1,000 price tag, industry experts feel other LCCs may try to match the offer on the same route.

According to Sharat Dhall, president of an online travel company yatra.com, "These are the good times for passengers."

"We expect this to spark a buzz in the domestic air market. The airline has already created excitement among travellers. We expect Air Asia's entry to catalyse growth in the domestic air market," he added.

According to industry experts, Bangalore-Goa is generally a busy route, with almost 80% load factor, except a few weekdays. "Hence, AsiaAsia's introduction of attractive fares will not have a major impact. This is just a limited offer to attract customers," said an industry expert who refused to be quoted.

The timing of the inaugural flight will be around 3 pm from Bangalore, and back to Goa around 6 pm. In the current financial year, the airline plans to expand to 10 cities.

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