Domestic air fares to climb 10%

Move seen as fallout of soaring jet fuel prices.

Domestic airlines are set to increase fares by about 10 per cent in the next few days. This is because jet fuel prices in the domestic market have gone up by about Rs 1,600 to an all-time high of Rs 38,860 a kilo litre.

The fare increase can come in the form of either a fuel surcharge or an increase in the basic fare. This is the second consecutive month that the jet fuel prices have gone up. In September, the prices went up by about 10 per cent.

Jet fuel expenses account for over 30 per cent of the operational cost of an Indian carrier, much higher than the global average of about 15 per cent.

Airlines will hold discussions over the next few days to assess the situation and take a call on the pricing strategy.

"This is the second straight month when the price has gone up. We cannot afford to absorb this. We will have to raise fares," said an executive with a domestic carrier.

State-run carriers are awaiting a directive from the government about the fare increase.

Similarity, private carriers like Jet Airways and Air Sahara are also looking at various options.

"The oil prices have been increasing since March this year and the last fare increase was in April. We have been absorbing the impact of rising oil prices since then. We will take a decision in the next few days," said a Jet Airways executive.

Officials said the government was keeping a close watch on the situation. "We want to look at various options and see what can be done to minimise the impact of this increase in the prices," said a Civil Aviation Ministry official.

The official also said the government would take a decision on the issue only after consultations with its political allies, including the Left parties.

If air fares go up, it will be the fourth fare hike in less than 18 months. In July and October 2004, domestic airlines hiked air fares by about 10 per cent to account for an increase in the jet fuel price. In April this year, the fares were increased by 12 per cent as a result of another hike in the prices of jet fuel.

The government has been contemplating a number of steps to bring down the Jet fuel price in the domestic market, including allowing airlines to hedge ATF in the international market.

Fuelling hike

Jet fuel prices have touched an all-time high of Rs 38,860 a kilo litre

Jet fuel accounts for 30% of the operational cost