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Jet, Kingfisher hike fuel surcharge by Rs 550
June, 03rd 2008

Jet Airways and its low-cost arm Jetlite, along with the Kingfisher-Deccan combine, have increased their fuel surcharge by Rs 300 to Rs 550 for short-haul and long-haul flights following the 19% hike in aviation fuel prices.

Now all flights in the domestic sector will have a new applicable surcharge of Rs 2,250 for less than 750-km distance and Rs 2,900 for other flights. The new surcharge will be applicable from Tuesday morning.

Air India has already increased the surcharge. Now the total component of the surcharge and other taxes will be between Rs 2,625 and Rs 3,275. Delhi-based low-cost carriers such as SpiceJet and Indigo are yet to take a call on any hike in surcharge.

Meanwhile, Civil aviation minister Praful Patel is planning to meet Prime minister Manmohan Singh over the hike in aviation turbine fuel prices. The civil aviation secretary will also approach the Cabinet secretary to convene a review meeting with all concerned ministries to discuss ATF tax and other issues.

If remedial measures are not taken to provide some interim relief, the impact of rising ATF prices will hit airlines. Already, ATF is around 45% of the total operating cost and a further rise in prices will make aviation sector unviable. It will be a big negative for the Indian economy.

The aviation ministry is expected to demand a central sales tax at 4% tax applicable across all states, in place of its earlier demand of 12% sales tax. It also proposes relaxation in norms for allowing domestic airlines to fly on profit international routes.

Mr Patel said on Monday: We are deeply concerned over rising ATF prices and the subsequent losses being suffered by domestic airlines. I will meet with the Prime Minister and the finance minister and seek some interim relief for the sector. We shall look at all options to keep the industry viable.

The minister said airlines were suffering huge losses and cant pass the entire burden (of ATF price rise) on users as it negatively affected their number of passengers carried by them.

Underlining the fact that ATF prices in India were priced at nearly 70% higher compared with international benchmark, Mr Patel said the basic price of ATF was very high against other countries and it needed to be reduced.

The minister said as a result, loss-making airline companies might soon prune their operations and rationalise their services for various sectors, which may affect connectivity for smaller cities and some non-profit-making routes.

The airlines would fly less to suffer lesser losses. The very concept of making aviation affordable for the masses and not the classes is becoming irrelevant.

ATF price has increased 5-6 times since 2005, and airlines are not in a position to pass on the burden to customers, which may lead to a major drop in passenger load and make operations of many airlines unviable, Mr Patel added.

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