``After a lot of research, we came to the conclusion that reducing air fare will help us to increase profitability in the long run due to growth in traffic volume,'' said a top Indian Airlines official.

Indian Airlines extended its 25 per cent discounted fares from Mumbai-New Delhi route to various like Mumbai to Ahmedabad, Vadodara, Calicut, Mangalore, Kochi and Vadodara sectors. Of this, Mangalore, Kochi and Calicut sectors are facing stiff competition from Konkan Railway which has introduced super-fast trainsbetween these areas. ``Instead of flying empty, we decided to offer discounts which, as our data shows, will help us to attract passengers,'' IA officials said.

On Tuesday, in order to take on Indian Airlines, Air India also joined the fare war by slashing rates on three destinations. These include Mumbai-Ahmedabad Rs 1,539 (day) and Rs 1,351 (night); Mumbai-Kochi Rs 3,003 (day) and Rs 2,619 (night) and Mumbai-Calicut Rs 2,801 (day) and Rs 2,445 (night). In fact, barring Jet Airways, all the other airline companies are making losses due to hefty discounts on offer. While Indian Airlines' operating profit has crashed to double digits in the first four months of current fiscal, Sahara and Air India are not expecting to make money till the next financial year. ``The discount war is hitting Jet really hard. The airline's overheads have gone up due to its relatively young fleet where lease rentals are high. Thus, the airline is unable to offer discounts while Indian Airlines and Sahara have announced heftydiscounts,'' analysts said.

Earlier, Parvez Damania of Sahara Airlines told this newspaper that Sahara will continue to offer discounted fares in order to attract more passengers. The strategy seems to have worked if rising passenger traffic of Sahara is any consideration. Passengers who called up this newspaper say the ongoing low fares in domestic industry has induced them to take flights instead of taking arduous train journeys. ``For the first time, air fare in the domestic sector has gone down. We expect this will continue so that more people can fly,'' said Ramesh Kamath who flew to Mangalore on Sunday after cancelling his Konkan Railway ticket.

On Sunday, Jet Airways announced in Pune that it will not join the fare war. Saroj Datta, CEO of Jet said: "We do not believe in the policy of discounting. Airline companies should realise that discounting would only increase the break even margins thus making the airline industry unviable," he said.