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Domestic flights get costlier by 5 to 15% this week
June, 20th 2008

Flying just got even more expensive with domestic airlines hiking fares by 5% to 15%, the second such move this month.

In the beginning of June, airlines had hiked the fuel surcharge following yet another increase in jet fuel prices. This time, they have decided to hike basic fares on three different route categories.

Jet Airways and Air India-domestic (Indian Airlines prior to merger) say flights covering a distance of up to 750km will have a minimum basic fare of Rs 1,000.

For distances between 750 and 1,000km, they announced a minimum fare of Rs 2,250. Routes above 1,000km will have a minimum base fare of Rs 3,000. The base fares will be topped up by fuel and congestion surcharge of Rs 3,275 for distances below 750km and Rs 2,625 for longer flights.

Which means, the minimum fare from Delhi to any other metro city will be Rs 6,275 which around four months back was around Rs 4,000. Jet said the hiked fares became effective from Wednesday and AI announced the changes will come into effect from Friday.

Kingfisher-Deccan combine said it will make an announcement in a couple of days. Even low cost carriers (LCCs) have become more expensive. Jet Airways CEO Wolfgang Prock-Schaeur announced that JetLite's minimum basic fares on the three distances would be Rs 500, Rs 1,500 and Rs 2,000.

Following the 19% hike in jet fuel prices earlier this month, SpiceJet didnt hike fuel surcharge, which other carriers had raised to Rs 2,250 from Rs 1,950 for distances up to 750km and from Rs 2,350 to Rs 2,900 on longer flights.

SpiceJet had instead hiked basic fares on these flights by Rs 300 and Rs 550, respectively equivalent to the hike in surcharge. Now from Friday, said the airlines VP (marketing) Kamal Hingorani, the surcharge will also be increased to the industry level. "Earlier, talks were on between various stakeholders to reduce sales tax on jet fuel. But now with those prices not falling, we have to increase the surcharge," he said.

Despite these hikes, airlines say, they are not able to cover their costs and expect a loss of over Rs 8,000 crore this fiscal. In the latest hike, the government has increased fares by 5% to 15%, the second such move this month.

The latest hike will mean a further slackening of demand as now fewer people can afford to fly. This, said industry players, will mean further reduction in number of flights something that will hit connectivity.

"I feel there's an overcapacity of 25% (in terms of number of seats offered on domestic flights) in the market and we are looking at cutting flights. The past four jet fuel price hikes have meant a 50% increase in our fuel bill. Jet Airways alone is spending $70 million extra every month. The cost base for the entire industry on an annual basis has gone up by $1.2 billion," said Jet Airways CEO Wolfgang Prock-Schaeur.

Flyers in south India will have to bear an additional burden of paying user development fees (UDF) at the new airports of Hyderabad and Bangalore.

At Hyderabad, where UDF will kick in from June 23 when the new airport completes three months of operation, the developer has proposed a fee of Rs 600 per passenger for flights going to other states and Rs 350 for those flying with AP. Similar fees will charged at the new Bangalore airport after it completes three months.

The aviation ministry's attempts to ask states to reduce sales tax on ATF came to naught recently when airlines told it that they would not be passing on the benefit of lower taxes to passengers. States have said they can consider reducing tax rates only if the passengers get some benefit. But with airlines facing big losses, that doesnt seem likely. The end result flying is getting increasingly costly by the day.

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