Speaking to this newspaper, Air India managing director Michael Mascarenahs said the falling fares are hitting the bottomlines of all airlines including Air India even as it has been burdened with a Rs 800 crore rise in fuel bill in the last six months. ``Fares were consistently going down in the last 5 years in dollar terms though in the rupee terms the growth is marginal,'' he said, adding, ``thus, our margins are constantly under pressure.''

The latest fare battle began with Amman-based Royal Jordanian Airlines giving massive discounts of over 45 per cent from India to London and New York sectors. Soon, Air India, British Airways and otherEuropean carriers followed. In fact, Royal Jordanian is creating a niche for itself by giving some of best bargains to the passengers with small budgets. ``This is now becoming an annual affair... a passenger needs to bargain with his travel agents in order to get the best discounts,'' said a travel agent.

The latest discounts will remain in force till mid-December after which the Christmas traffic and the millennium tourist traffic is expected to rise. The second phase of discounting will begin from mid-January till March-end next year.

Air India, famous for its deteriorating in-flight services, is against discounting as it is affecting its turnaround drive. The airline managed to post a Rs 1.26 crore net profit. AI's efforts at cost rationalisation have seen it making a marginal profit for the first five months of the current fiscal as against a whopping loss of Rs 106 crore in the same period of last year.

Citing an example, Mascarenhas says that the Mumbai-New York sector's official fare in rupeehas gone up to Rs 40,331 as compared to Rs 34,208 in 1991 which is a very marginal increase. On the same sector in return journey, the dollar fare has, in fact, come down. ``Yet airlines decrease fares which lead to falling revenue and more losses,'' he said.