Rising fuel prices: IndiGo hikes fares, others pvt airlines may follow suit

IndiGo, the country's largest domestic airline, has hiked fares reintroducing fuel surcharge of Rs 200- Rs 400 on domestic routes.

IndiGo said the decision to charge the levy was needed on the back of  recent spike in fuel price and depreciation in rupee – twin factors, which are impacting airline profits.

Other private airlines are also expected to follow suit and increase the fares but so far none of them have announced it.

“Aircraft fuel expenses represent the single largest item of IndiGo’s total expenses, accounting for around 40 per cent of the airline's cost of operation. Furthermore, the depreciating Indian rupee is an additional cost burden on the Indian carriers. Given this scenario for a low cost airline, levying a surcharge has become inevitable. A sum of Rs 200 will be added on routes less than 1,000 km distance, and Rs 400 on routes longer than 1,000 km distance. The surcharge will be applicable on all domestic trips, i.e. within India, and will come into effect at midnight on May 29,” the airline said in a statement.

Last week Jet Airways Chief Executive Officer Vinay Dube had said the airline expected a balance in fuel prices and airfares in coming months. Dube had hinted that the airline would be able to pass on high fuel costs as a large share of its traffic comprises corporate travellers who are less price sensitive than other category of travellers.

Jet Airways, which posted Rs 10.4 billion loss in fourth quarter saw capacity deployed increase 10.1 per cent but  the total revenue went up only 8.1 per cent as average revenue per passenger declined by a per cent.

Arilines’ margins have been squeezed by the surge in crude oil prices. A week earlier, Brent crude touched $80 a barrel, for the first occasion since November 2014. With excise tax, ATF in India is one of the costliest in the world.

With the rising price of aviation turbine fuel (ATF), airlines are asking that it be put under the goods and services tax (GST).