Get ready to pay more for your air travel this holiday season, Fares are expected to go up by around 12% from the first week of December. Differing from airline to airline as well as sector to sector. The hike would be around Rs 360 per sector, highly-place airline industry sources said on condition of anonymity.
Captains of the airline industry met in the Capital on Wednesday and have arrived at an informal understanding to avoid undercutting, the sources said. Jet Airways chairman Naresh Goyal, Kingfisher chairman Vijay Mallya, Arvind Jadhav of Air India, Rahul Bhatia of Indigo and Sanjay Aggarwal of Spice Jet were among those present at the meeting of the Federation of Indian Airlines .All the airline companies said there was no joint decision on fares, but the sources said the denial was due to the fear of cartelization charges which would invite the wrath of the government and regulators.
Mr. Goyal and Mr. Mallya said the meeting discussed industry issues like the new ground handling policy. Airlines should be allowed to continue self-handling and the issue would be taken up with the concerned authorities, they added.
The proposed fare revision would be effected by tweaking the yield management system of airlines, the sources said. The number of seats sold through the lower buckets would be cut sharply and discounts would be rolled back to the minimum, they added. No announcement would be made, but simple adjustments to the revenue management system, which is run through software, would take care of the hike.
The upward revision would be highest for the last week of December and the first week of January, the sources said. Continuous reduction in capacity since the beginning of this year and better-than-expected peak season demand has enabled airlines to hike tariffs, they added.” Within days of each other, most major airlines would push up their tariffs for the peak season,” the sources added. There was fear that some airlines, especially the no-frills players, might undercut as they had done on previous occasions and that issue has been sorted out, they explained.
The move gives all airlines an opportunity to wipe up a bit of red ink from their balance sheets. Network carries like Air India, Jet Airways and kingfisher are expected to go in for higher upward revision as compared to budget carriers like Spice Jet and Indigo, the sources said.
Jet Airways ‘Goyal has been emphasing on the need to cut overcapacity which was knocking out yields, leading to increasing losses. However, he declined to comment on fare hike possibility after the meeting, insisting that the agenda was to sort out problems relating to the new ground handling policy which was to come into place by January 2010.
Without directly stating the need for hiking fares, Kingfisher Airline chairman Vijay Mallya said. “Five years ago, average fare was Rs 6,000.Now it is Rs 3,000 .That’s the revenue side. On the cost side, crude used to cost $35 per barrel. Now it is over $80 per barrel. Over and above this , we have 26% sales tax on aviation turbine fuel. Costs are going up and fares are going down. This cannot be sustainable.” Paramount Airways managing director M Thaigarajan said there should be a balance between growth and profitability.” At the Rs 6,000 level, average fares are too low. There has to be a balance which is somewhere mid-way,” he said.
While demand has been improving during the recent months, airlines are worried about increasing fuel costs. After sliding to $40 per barrel. Crude has inched up to $80 per barrel and there is a feeling that prices would only increase once the recovery of the global economy takes roots. The airline industry has been pitching for a relief package from the government, but the civil aviation ministry has ruled out any such assistance, emphasing that only Air India will get support since it is a state-owned company.
|
|
