Abstract – Effects of excessive fuel price rise in 2008 (Fig. 1) and falling rupees (in terms of US$) (Fig. 2), created a major imbalance between supply and demand in Indian airline industries in recent years. Due to these external factors, Indian airline industries, an oligopoly market, had to increase airfares in many folds and some low cost carriers (LCC) took a short run decision to shut down the operation in a few short distance routes to avoid huge losses. Substitution effect (increase in number of the railways passengers) was observed, maintaining the law of demand of Economics. Recently, when fuel prices are reduced (by nearly 57% from August 2008 price), competition in the market returns and being price taker in the competitive market, airline industries have started slashing their airfares. These fascinating economic phenomena are delineated and explained with sufficient data wherever needed in the present report.