Indian Airlines has decided to gradually phase out its 737-200s, which are currently used by Alliance Air.

Addressing an interactive session organised by Confederation of Indian Industry, Sunil Arora, chairman and managing director of Indian Airlines said that the organisation had floated a tender and the closing date was July 30.

Indian Airlines would be replacing its 737-200s with A319, which was at the most six years old. There were eleven 737-200s in operation and Arora said the aircrafts would be phased our subject to availability.

Indian Airlines officials said, the replacement could result in savings of15-20 per cent in operating costs.

Indian Airlines was also likely to take on the proposed no-frills airlines with Alliance Air.

When asked about the measures being adopted by Indian Airlines to combat competition from no-frills airlines, Arora said that the organisation already had a low-cost model in the form of Alliance Air and would react, once the no-frills airlines were launched.

However, Arora also said that flexi-fares were here to stay. He said that flexi-fares was the biggest development in domestic civil aviation and the passenger had emerged as king.

Arora pointed out that prior to flexi-fares, fares were primarily cost-driven while flexi-fares were market driven. "An unoccupied seat, once the aircraft took off was an investory lost" said Arora.

Sanjay Budhia, immediate past chairman, CII (ER) said, international fares were often cheaper than domestic fares, thus luring potential tourists away from India.

"While a good beginning has been made with apex fares, the booking time is too long and business travellers, who travel on short notices are not able to avail of it" he said.