Indian airlines pricing themselves into oblivion?? :-P

Most likely, most people reading this don’t give a hoot for Indian airlines, but it is a mildly amusing story.

Via this post at Live from a Lounge, apparently the Indian airlines have been pricing themselves into oblivion by charging money-losing fares.  Apparently rising fuel prices and a weakening Indian rupee, along with predatory pricing by Air India, are to blame (in case you’re not familiar with predatory pricing, see this article).  Airlines are known to engage in this practice, for example, to protect a fortress hub from a potential new competitor.  An airline that has a large operation at a particular airport can cut their fares out of that airport to a level that is not sustainable for a smaller competitor to cut their price too (this isn’t truly predatory pricing, because of the cost structure of running an airline as well as economies of scale that an airline may have means the fares may not truly be money losing).

Anyway, semantics and details aside…a well run company isn’t supposed to price themselves into the ground.  A well run airline should also probably be hedging fuel prices, seeing as how that a large portion of its costs.

Kingfisher was set to join the oneworld alliance while Air India had reentered talks to join Star Alliance, so this business could have potential affects on alliances.