Domestic air fares are slated to rise by 11.2 per cent across all sectors, except the Northeast, from October 1. This follows the Indian Airlines' board's clearance to a hike in fares after a meeting yesterday that lasted over five hours. The move is reported to have the tacit approval of the civil aviation ministry.
The hike will come into effect a little under a year since the last one on October 15, 1997. The carrier had then announced a 14 per cent hike on short-haul routes and 10.5 per cent on long-haul routes, resulting in a cumulative increase of 11.5 per cent.
Yesterday's decision marks the 10th time the carrier has raised its fares since 1990. The latest hike is expected to fetch IA around Rs 100 crore. Its profits this year are expected to be around Rs 91 crore.
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Jet Airways and Sahara Airlines, the two private operators, confirmed that they would match the hike in fares by Indian Airlines. They argued that, in fact, a fare hike of around 15 per cent was required to compensate the carriers for their increased costs.
"I don't think the fare hike will have any effect on traffic, especially corporate customers," said Sahara chief general manager Kapil Kaul. He said he was hopeful that seat factors would pick up over the next three months, which were crucial. "I am hopeful that the seat factor will pick up to 70-75 per cent from 61 per cent in April-October". Costs have gone up 10 per cent on account of the devaluation alone, said Kaul.
Sahara at present has the costliest business class fare with prices Rs 500 above the fare charged by Jet airways. The three airlines are at par on economy fares. Sahara however offers a standby optional fare (20 per cent lower than the normal gross fares) for passengers who reach the airport last minute and avail of cancelled seats etc,
IA insists that its fare hike was only to offset the increases in input costs. The management pointed out to the board that the rate of inflation had risen from 4 per cent to the present level of 8 per cent and that the price indiex was 10.5 per cent higher than what it was last year. It was also pointed out that the rupee had depreciated by 20 per cent.
IA also argued that it had cut costs including a total ban on overtime, freeze on direct recruitment, reduction in engineering expenditure, closing of booking offices, freeze of capital expenditure and review of uneconomical flights.
It is understood that the board meeting was stormy with several members severely opposing the hike. The minister Ananth Kumar had also been against the hike but over the last few days was persuaded to allow it.