But he also states that low fares would be available if tickets are booked in advance. According to him, ATF prices have been down 16 per cent in the past month. He mentions that there is no cartelisation among low cost carriers.
Excerpts of CNBC-TV18's exclusive interview with Siddhanta Sharma:
Is it the beginning of some kind of cartelisation in your sector?
Beginning of rationalisation of senses, I would say, no cartelisation at all. I think the fares have been under pressure because of the increased capacity in the market and that was coupled by the low season in the monsoon.
With the festive season coming now, I think some sense is prevailing and we are looking at having some sort of minimum fare below which one should not be selling. So it is not really cartelisation but making some business sense out of the whole thing.
Would you also reduce the number of seats available on discount as a corollary of raising prices?
I think what will happen is that low fares would still be available if one books well in advance. But closer to the date of travel, the fares would tend to go up.
What sort of minimum fare have you worked out and what sort of price hike are you expected to announce in the next few weeks?
I don't think there is any minimum fare that has being worked out; it depends upon the cost of the operation of various types of people. So legacy carriers or traditional carriers would have their own strategy where I think the low cost carriers would see increase of around 5-7 per cent at least in the fares, going in November and December.
For the past month or so, how much have ATF (Aviation Turbine Fuel) prices come down for you?
They have come down by about 16 per cent.
Could you give us a ballpark figure of how much this might augment your profitability per quarter on fuel prices coming down and the fare hikes?
We are looking at per AFK cost, what we call in airline terms. That has come down by almost 15 paise. It used to be Rs 2.75-2.80 earlier, it has come down to the level of Rs 2.60 now due to fuel and the yields, which used to hover around Rs 2.20-2.30 per AFK would now tend to go up by about 7-8 per cent.
What is the rationalisation at this point? Kingfisher, Jet, Sahara, Indian Airlines will raise prices by 3-5% and the low cost airlines by 5-7%, is that correct?
Low cost yield should go up by about 7-8 per cent. What I am saying again is that the low fares would continue if one book in advance 3-4 weeks in advance. But closer to the date of travel, we would stick to a price closer to our cost. I think that is a sanity, which must come into the market.
What led to this sudden decision?
Somebody has to take a lead forward and I would not like to take any credit or whatever. But even in the fuel surcharge that we had imposed earlier, the decision was that we have not fully recovered from the levels of April 2005 due to competition. Therefore, there was a decision to hold on the fuel surcharge at the level despite the fuel prices coming down.
Is there more to come in terms of fare hikes this busy season?
No, I think this should be okay for the time being. We are also watching the capacity additions by the carriers; how it is happening and what moves they will make. There is also an eye on crude prices in the coming winter season. We don't know how the West will purchase or what will be demand for oil in the winter season there. Therefore, the prices are likely to go up again in January. So if that happens, then we will not take a decision of fuel surcharge today and then reverse it, maybe a month later.
Airfares in India may go up by 3-5%
For more information about trading and markets log on to www.moneycontrol.com