Air fares may be hiked by 12%

Airlines Try to offset the massive increase in aviation turbine fuel prices

Domestic air fares are likely to go up by about 12 per cent in the next few days, as airlines are planning to hike ticket prices to offset the massive increase in prices of aviation turbine fuel (ATF).

Aviation fuel prices in the domestic market have gone up from Rs 27,250 per kilolitre in March. to Rs 32,250 per kilolitre in April.

Jet fuel prices have severely impacted the cost of operations of airlines as they account for about 25 per cent of operational costs. 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 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 an executive with a domestic private airline.

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

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

The jet fuel price increase 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 on account of the hike in jet 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 the hike in the last fiscal.

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 an official.

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

The government is of the view that the airlines are not in a position to absorb the spiralling ATF prices. It may also be noted that most international airlines operating in the country have imposed a fuel surcharge.