Mumbai/New Delhi: Jet Airways, the country’s largest carrier, said Air India is compounding a

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price war that has caused industrywide losses and prompted Kingfisher Airlines to cut flights.

Air India is discounting fares and that’s absolutely a problem, M. Shivkumar, senior vice-president of finance at the Mumbai-based carrier, said on Wednesday. Ideally, fares should go up when oil-import costs go up. That’s not happening and that’s why airlines are in this situation.

Jet and Kingfisher, the country’s two largest listed carriers, have lost a combined Rs 63 billion in three years as low fares and rising fuel prices offset surging passenger numbers. Air India has also been unprofitable since a 2007 merger, causing it to win Rs 32 billion of state bailouts and seek another Rs 65 billion before the end of March.

At the fare levels that Air India has in the market, the airline will continue to lose money and be an ongoing drain on public funds, said Binit Somaia, a Sydney-based director at industry adviser CAPA Centre for Aviation. Its low prices are also destabilising for the entire industry, he said.

Air India’s prices are determined by market forces, said K. Swaminathan, a spokesman. Fares are submitted and approved by the Directorate General of Civil Aviation, he said. Every other airline in India also needs to file fares with the industry regulator. The regulator isn’t asking airlines to stop offering low fares, said EK Bharat Bhushan, its director general. The authority will step in only if there is a huge aberration, he said in New Delhi on Thursday.

Air India was charging Rs 10,258 for an economy class ticket to fly from New Delhi to Mumbai on Nov. 24 and return the next day, according to its website on Thursday. Jet was charging Rs 12,207 for similar trip on the 874-mile journey, through an online promotion.

Jet plans to sell and lease back some planes to repay $300 million of loans within six months, Shivkumar said. The carrier is in talks with suppliers on cutting costs, he said without elaboration. The airline’s second-quarter loss widened to Rs 7.14 billion, it said last week. Kingfisher is also seeking funds through share sale and new loans.

The cabinet will discuss in two weeks a proposal to allow foreign carriers to buy stakes in local airlines, a civil aviation ministry official, who declined to be identified citing government policy, said in New Delhi on Thursday. The ministry recommended foreign airlines be permitted to purchase up to 24 per cent of shares, the official said.

PK Mohanty, a spokesman at the ministry, didn’t answer calls to his mobile phone, seeking comments.

Jet Airways plans to expand operations at its budget unit as it adds four Boeing’s 737 aircraft, Shivkumar said. That contrasts with Kingfisher, owned by billionaire Vijay Mallya, which is abandoning the low-cost market to instead focus on full-service operations. In the first eight months of this year, Jet had 26 per cent of the domestic market, including low-cost unit JetLite, according to data from the aviation regulator.

Kingfisher and IndiGo, the biggest budget carrier, had 19 per cent apiece, while Air India had 17 per cent.