Air India takes price war to higher plane

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BOMBAY - Air-India has fired a fresh round in the ongoing air fare war in India with the introduction of steep discounts across its economy, executive and first class categories. It's a move that is likely to be matched by foreign airline rivals.

The Bombay-based state-owned international airline has introduced a scheme dubbed "Premium Plus", in which passengers flying executive or first class to any destination served by Air-India may tag along a companion paying only 10% of the second traveler's regular fare. The phenomenal 90% discount - the highest ever offered in its categories - is an aggressive attempt to utilize unused capacity in the executive and first classes.

A second promotion, "Senior Citizens Bonanza", entitles people aged 65 and over to drastic discounts on Air-India round-trip flights to Europe, the U.S., Hong Kong and Singapore. Ranging between 10% and 20%, the discounts attempt to woo elderly passengers to fly Air-India.

Other international airlines in India are expected to offer equally enticing freebies and low fares. Air- India late last year cut fares and introduced weekly lottery draws for free travel to select destinations. Lucky ticket holders were every week plucked from a lottery and awarded a free car. The response from competition was swift. British Airways offered discounts proportionate to the age of travelers under 70 years old, KLM Royal Dutch Airlines gave 35% off and Lufthansa offered a $280 cut on economy tickets to Europe. United Airlines last year also ran a promotion on traveling companions.

Despite recording estimated losses of $56m on 1995 revenues of $1bn, Air-India is pushing ahead with plans to tap lucrative routes, simultaneously axing flights to less profitable areas like South Africa. Air- India currently leads the international air travel market in India with a 22% share, followed at second place by BA at 13%.

Hindustan Thompson Associates, Bombay, handles Air-India; M&C Saatchi Agency affiliate Pressman Advertising & Marketing, Bombay, handles BA.

Copyright January 1997, Crain Communications Inc.

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