State-run carrier Air-India said it will cut its fuel surcharge for all domestic flights by 400 rupees, effective Dec. 2, following a softening in jet fuel prices.

The fuel-surcharge is currently 2,350 rupees for sectors below 750 kilometres and 3,100 rupees for sectors over 750 kms, the airline said in a statement.

The reduction in fuel surcharge is expected to stimulate the domestic air travel market during the winter peak season, the firm said.

"Although crude prices are still volatile, we hope it will stabilize at the current levels, so that there is a short to medium term relief in ATF (aviation turbine fuel) costs," its chairman, Raghu Menon, said.

ATF makes up nearly half of an airline's operating costs.