Rly fare cut doesn't spook us, say low cost airlines

Displaying his business acumen, right when its needed, Lalu Prasad Yadav announced passenger fare cuts, while keeping freight rates unchanged in the Railway Budget 2007-08.

In the super-fast trains category, the charge for unreserved super-fast travel has been reduced by 20%, from Rs 10 to Rs 8. The fares for 1st and 2nd class AC travel have been reduced by 6% and 4% respectively. Fares have also been cut for travel on new-design coaches, whether sleeper or chair car.

Reduction in fares will also be effected in all classes of high capacity new design coaches, which will be four per cent in busy season and 8 per cent in lean season in AC three-tier and AC chair car and four per cent in all seasons in sleeper class.

Lalu's moves at slashing passenger fares comes each year in a bid to encourage travellers to opt for railways rather than low-cost airlines, which have now caught the fancy of millions with cheap fares.

However, low-cost airlines claim that the moves of the Railway Minister will not push them to reduce their fares further.

MD of Deccan Aviation, Gopinath says that the cut in fares in the Rail Budget will not impact them, since their rates are already lower than the railway AC first class rates.

"Almost all my fares are below railway AC first class. Every fare of Air Deccan is about 15-20% below air conditioned first class so I don't think that is going to impact low cost air travel, on the contrary all these things are signs of the new economy and air traveling will be a boom."

He added that Air Deccan will not be looking at revising any fares.

Kingfisher Airlines Director A K Ravi Nedungadi also said the fare cut by Railways would not have any negative impact on the airline industry.

"The minister is doing the right thing. However, we do not see any negative impact. The fare cut will certainly be helpful in increasing traffic in shorter travel but for longer distance people will not change from airline to Railways," Nedungadi added.

-Sakshi Sharma (with inputs from CNBC-TV18)