Aviation fuel rate hike to make air travel costlier by 10-14%

Yesterday's hike in aviation turbine fuel (ATF) prices is likely to lead to a 10-14 per cent increase in fares on metro routes and long-haul flights.

The oil companies hiked ATF prices by 14 per cent as a result of global rise in crude oil prices over the last few months.

Now, most airlines, including Jet Airways and SpiceJet, are looking at imposing a differential surcharge "" a smaller increase on shorter routes than longer routes.

Sources say routes such as Delhi-Mumbai, Mumbai-Bangalore and Kolkata-Chennai may see a Rs 350 hike in surcharge. The present rate is Rs 1,650. On short flights like Mumbai-Pune and Delhi-Jaipur, the increase will be only Rs 150, sources say.

"We are going to levy a differential surcharge from April 7. The surcharge will be in place for our summer schedule tickets," said KG Vishwanath, general manager, MIS and Investor Relations, Jet Airways. 
 

Short haul	Fares (current  surcharge)	Fares (increased surcharge)
Delhi-Jaipur	3,125	3,275
Mumbai-Ahmedabad	3,200	3,350
Chennai-Coimbatore	2,500	2,650
Long haul
Delhi-Mumbai	2,674	3,024
Mumbai-Bangalore	2,775	3,125
Kolkata-Chennai	3,200	3,550
All fares in Rs

SpiceJet executives said they would also be looking at a differential surcharge of Rs 1,800-2,000. Other low-cost carriers like IndiGo and GoAir are also looking at a similar figure.

However, Kingfisher and SpiceJet may be looking at a lower surcharge for Hyderabad and Kochi airports as the sales tax on ATF in Andhra Pradesh and Kerala is much lower at 4 per cent.

"We have not decided on the fuel surcharge yet and are looking at what other airlines are doing. But yes, we may consider Hyderabad and Kochi as special cases," said Hitesh Patel, vice-president, Kingfisher Airlines.

Analysts say the rise in fares will have a negative impact on an already decelerating growth in domestic traffic. According to analysts, the immediate impact on peak season sales may be 3-5 per cent.

"Any further rise in air fares will have an adverse impact on overall traffic and future growth of the sector. Leisure and holiday travellers are typically impacted the most as they are more price-sensitive. With ATF prices projected to remain extremely high in the short term and due to continued capacity induction, all carriers will quickly chalk out their pricing strategies, particularly for the forthcoming summer season," said Kapil Arora, partner (aviation sector), Ernst and Young.

"For the carriers, there will be the twin challenge of efficiently managing their high-cost operating structures and achieving a greater market share," said Arora.

According to industry estimates, the growth in domestic traffic this year will be about 23 per cent, down from last year's 32 per cent.

"Also, airlines are looking at decreasing the basic fares even for the peak season to maintain their load factor against a projected fall in traffic. But the increase in surcharge will offset this decrease in prices," said a travel portal executive.