Jet, Sahara follow IA, hike fares

Private carriers Jet Airways and Air Sahara today announced a hike in their air fares as a result of an increase in jet fuel prices. This comes close on the heels of state-run Indian Airlines raising fares by 12 per cent.

Aviation fuel prices in the domestic market has gone up to Rs 32,250 per kilolitre in April compared with Rs 27,250 per kilolitre in March. The fare hike will come into effect soon. Indian Airlines had announced the hike on April 2.

Any hike in jet fuel prices can severely impact airlines' operations. This is because jet fuel prices account for about 25 per cent of the operational costs of carriers.

Airlines have been holding discussions over the last few days to assess the situation and take a call on the pricing strategy.

"We have seen a severe impact on the cost as a result of the fuel price hike. Such a massive price hike cannot be absorbed. We may have to pass on a fraction of it to the customers," said a Jet Airways executive.

This will be the third fare hike in less than a year. In July and October 2004, domestic airlines raised fares by about 10 per cent to account for a hike in jet fuel prices.

In November, aviation turbine fuel prices had touched an all-time high of Rs 33,600 per kilolitre. This is much higher compared with the annual average price of Rs 21,000 in 2003-04.

The increase in jet fuel prices has been playing havoc with the operations and finances of the Indian carriers.

For example, Indian Airlines' revised net profit for 2004-05 was Rs 17.5 crore, which has fallen from Rs 44.5 crore in the previous year, primarily because of the hike in fuel prices.

The fuel bill of the state-run carrier rose from an estimated Rs 1,445 crore in 2003-04 to Rs 1,806 crore owing to an increase in the jet fuel price in the last financial year.

Officials said the government was closely watching 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 government official.

Sources also said the government would take a final call on the issue only after consultations with its alliance partners, including the left.

The government is of the view that the airlines are not in a position to absorb the spiralling ATF prices. Besides, most international airlines operating in the country have imposed a fuel surcharge.

AJT effect

• Aviation fuel prices have gone up to Rs 32,250 per kilolitre in April from Rs 27,250 in March
• Jet fuel prices account for about 25 per cent of the operational costs of carriers
• This will be the third fare hike in less than a year
• In November, aviation turbine fuel prices had touched an all-time high of Rs 33,600 per kilolitre
• IA's fuel bill rose from an estimated Rs 1,445 cr in 2003-04 to Rs 1,806 cr due to the price hike last fiscal