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Air fares set to go up by 8-10%
June, 03rd 2008

Air fares are set to go up again, with the government announcing an over 18 per cent average increase in the prices of aviation turbine fuel, effective Saturday midnight.

Airlines are preparing to increase the fuel surcharge, which is expected to push up fares by 8 to 10 per cent. "We should be able to come out with the exact details of the hike in fares by Monday. It has become absolutely necessary to consider a fare hike," said Hitesh Patel, executive vice-president, Kingfisher Airlines. According to sources within the airline, Kingfisher will jack up the fuel surcharge to Rs 750, split in two parts.

Mumbai-based low-cost carrier GoAir said it is looking at differential pricing. The airline is looking at introducing a separate haul category - a medium haul (600-1,000 km) - where it can adjust the fare increase. The aim is to spare the short-haul fliers.

"It is not an issue of a simple price hike for us. We will announce the increase in fares later this week," said G P Gupta, chief financial officer, GoAir.

The largest private carrier, Jet Airways [Get Quote], could not be contacted and its CEO Wolfgang Prock-Schauer neither took calls nor replied to text messages. Airlines had announced an additional levy of Rs 350 as fuel surcharge last month.

"We will have to pass on the additional costs incurred to the passengers, there is no way we can absorb these costs," said G R Gopinath, executive director, Simplify Deccan.

Emphasising the criticality of the situation, Gopinath said the government must now ensure that the air traffic control does better, as at least 10 per cent of the operational costs of the airlines are due to inefficient airport infrastructure and delays. "Aviation now will be all about efficiency and the low-cost model becomes all the more relevant, " he said.

Air India said it will increase the fuel surcharge for  flights up to 750 km by Rs 300 and for flights beyond that by Rs 550, effective June 3.

Airlines had been hoping that there would be some result in negotiating lower excise and customs duties for ATF or a concession from the state governments to bring down the sales tax to 12 per cent as against 25-30 per cent. But none of this has gone in their favour.

"The situation is explosive. It is for the government to decide whether they want airlines to fly in this country or not. We are in a critical state right now," said Gupta.

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