Domestic airlines are contemplating airfares hike by increasing the fuel surcharge component in a fortnight due to rise in operational
costs. After hitting a two-year low, airfares are likely to rise by 10% in September.
ATF prices in the domestic market have gone up by 50% from the lows of March.
Global crude price is hovering near $73 a barrel and hardly any chance to come down immediately leading to fares hike in the current month, said an industry analyst with domestic brokerage firm. Airlines will have to increase fares to minimise the gap and to achieve break-even . The steady rise in aviation turbine fuel (ATF) prices has made it tough for the airline industry to stay afloat without hikes in fares, he added.
“We are getting feelers of about an Rs 300 increase in fuel surcharge by low-cost and full service carriers in September,” said travel agents in Mumbai and Delhi. Post this expected hike, a ticket on the Mumbai-Delhi route will cost around Rs 2,500 on budget airlines and Rs 2,800 on full service carriers—these are all-inclusive fares.
Carriers have no option left but to hike fares even in a price-sensitive market. Industry trackers pointed out that the reluctance of states to reduce sales tax on ATF has been the trigger for the proposed fare hike in September. Earlier, the civil aviation ministry and airline companies had sought the inclusion of ATF in the “declared goods” list.
However, the chairman of the empowered committee of state finance ministers Asim Dasgupta, last week, said states would not review sales tax rates on ATF. Sales tax on ATF varies between 12% and 35% depending on the state. A uniform sales tax rate of 4% would make jet fuel substantially cheaper.
Paramount Airways managing director M Thiagarajan, when contacted, said that carriers will increase fares marginally to adjust the ATF price increase. Meanwhile, Kingfisher Airlines, it is learnt, is working out details on the impact of two successive ATF price hikes. “We are contemplating a hike in fares though no firm decision has been taken yet,” said the airlines’ spokesperson. Air India spokesperson said that it’s too early to comment and will take decision at the appropriate time.
An email sent to SpiceJet remained unanswered though a senior SpiceJet official said fares hikes will take place this month due to successive hikes in ATF prices apart from an increase in parking and landing charges. A Jet Airways spokesperson said a decision has not been taken whereas IndiGo and GoAir didn’t reply to emails.
The domestic airline industry is estimated to have lost Rs 10,000 crore in 2008-09 , mainly on account of high fuel prices. Globally, airline losses may total $9 billion this year, nearly double a previous forecast, according to the International Air Transport Association.
|
|
