Cashstrapped Air India - which has been accused of charging below-cost fares in the last few months to show higher aircraft occupancy - has finally decided to do "course correction" as per media reports. Private domestic airlines, both full service and low-cost carriers (LCC), which were also forced to cap their fares due to market compulsions, are also likely to go for hikes in the coming days. While no airline was willing to give an estimate of the increase, industry sources said a 10%-15 % increase in basic fares was on the cards.

While the aviation ministry said it would not interfere in fares - unless airlines gang up to exploit a situation by hiking fares exorbitantly like last Diwali - it is monitoring AI's cash flow very closely. Aviation minister Vayalar Ravi has ordered a twice-daily monitoring of AI that is conducted by aviation secretary Nasim Zaidi and the new CMD Rohit Nandan. "In the past few months, AI was offering very low fares and there has to be a correction as the airline needs a strong cash flow to survive. As oil companies have put us off the cashand-carry list, we now have a flexibility of Rs 225 crore every month, from which we'll pay salaries," said a senior official.

Meanwhile, India’s domestic carriers, struggling with mounting losses amid a fare war unleashed by Air India Ltd, met in Mumbai on Monday to decide on a strategy to shore up revenue and widen margins in a move that’s being watched by the aviation ministry. “They want to hike base fares,” said one of three airline officials with direct knowledge of the meeting and what was discussed. All of them declined to be identified because of the sensitivity of the matter. The post-lunch meeting, which was called at short notice, was held at Mumbai’s Waterstones Club, close to the international airport.

Those who attended the meeting included Jet Airways (India) Ltd executive vice-president Anita Goyal, Kingfisher Airlines Ltd chief executive officer (CEO) Sanjay Aggarwal, SpiceJet Ltd CEO Neil Mills and GoAir CEO Giorgio De Roni. Representatives from state-owned Air India and budget carrier IndiGo, run by InterGlobe General Aviation Pvt. Ltd, didn’t attend.