BA sparks international price warover Indian skies

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BOMBAY -- British Airways has set the cat amongthe pigeons by announcing a drastic cut in itsairfares from India to London and other parts ofthe world, forcing its European, Indian and U.S.rivals to follow suit in a take-no-prisoners warfor Indian travelers.

A Bombay-London-Bombay ticket in BA's economyclass will now cost only $650, while fares to therest of the world have been slashed by 40%. State-run Air-India, which immediately had to announce asimilar discount, has cried foul, and carriers likeKLM Royal Dutch Airlines, Northwest Airlines,Delta Airlines, Emirates, Swissair and Air Francehave similarly cut ticket prices.

"These airlines have been asking for morefrequencies in and out of India. Now our stand isvindicated," says an angry Jyoti Kalani, spokesmanfor Air-India. "There is a surplus capacity [of seats]and less people flying; that's why British Airways isoffering such discounts." Air-India suffered losses of$147 million for the April 1995 to June 1997 period.

BA says its intention is to honor India in its 50thyear of independence from British colonial rule. Theairline has asked the Indian government to increasethe frequency of flights to India. So have Lufthansaand Singapore Airlines, for whom India is a bigmarket in the region.

"We thought of doing this for Republic Day [onJanuary 26] and in honor of India's 50th anniversaryof independence," says Bianca Menezes, BA's marketingmanager in Bombay. "The offer also encourages Indiansto travel overseas and takes into account the devalua-tion of the Indian rupee [which makes air travel costlier]."

Worst hit by this new round of discounting will beAir-India. To match BA's offer, the airline slashedits Bombay-New York-Bombay economy-class fare to$625 from the earlier $920.

Fares to Europe and parts of the U.S. have also beencut by 45% and a companion-free offer for first-classpassengers on select routes has been revived. Thespokesman admits it stands to lose the most with thisairfare war.

KLM went one step further and announced a 50%discount on India-U.K. roundtrips. It has matchedBA's and Air-India's ticket prices on other routes.Air France is offering a 32% discount and Delta willcharge a flat rate of $725 for roundtrips to NewYork. Swissair has offered 47% off on return ticketsto London, Zurich and Geneva, while a roundtrip'sprice to New York has been halved.

All BA discounts are time-bound and require ticketsto be bought either by month's end or mid-Februaryand travel to be undertaken before March 31, theend of winter and the start of the busy spring season.

Air-India is currently the market leader ininternational air traffic from India, with a 20%to 22% share. BA leads the pack in foreign airlines,though Lufthansa German Airlines is almost level,with an 8% to 10% share. Overall market growthhas slowed to 5% or 6%, says Air-India's Ms. Kalani.

While other airlines have yet to support thediscounts with an ad campaign, BA is running dailyads in newspapers;, it has no plans for an expansioninto other media due to the limited offer period.The print ad, via Interface, New Delhi, a spin-offof FCB-Ulka Advertising, bears the headline: "We justshrunk the world by 40%."

Copyright January 1998, Crain Communications Inc.

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