With prices of crude oil consistently rising since October, airlines are passing on some of the cost to the consumer and will continue to do so to meet the increased air turbine fuel (ATF) expenses.
Airlines in the past few days have raised fares by 10 per cent to marginally offset the rising crude prices, as ATF cost is around 40 per cent of airline’s total operating cost. Indian basket of crude has reached $112 per barrel mark. The airlines are reviewing the jet fuel prices on a daily basis and will keep increasing it.
Terming the present crude prices unsustainable for airlines’ survival, SpiceJet CEO Neil Raymond Mills said, "We have already started passing the burden of high crude prices on to the customer by raising fares and are reviewing it on a daily basis. Pricing of tickets is dynamic and changing everyday and not absolute or same across the board. At current levels of crude, airfares must be raised by Rs600-700 to break even.”
Kingfisher Airlines has also raised fuel surcharge to offset some of its burden. “Kingfisher Airlines has sufficiently raised fuel surcharge to meet rising crude expenses and we have not seen any impact on the demand," said Chairman Vijay Mallya.
Full service carrier, Jet Airways has also adjusted fuel surcharge to absorb the impact of rising ATF prices. "We have not raised the fares but have adjusted the fuel surcharge. We are forced to pass it on to the passengers as increasing fuel prices has squeezed our margins," said Sudheer Raghavan, chief commercial officer.
The airlines have also asked the government to take steps to reduce the cost of aviation fuel, which attracts sales tax as high as 33 per cent in some states.
The government should include ATF in the new Goods and Service Tax (GST) or make it a "declared good" under the present central sales tax regime, which will allow a uniform four per cent sales tax on ATF across the country, they demanded.