High ATF cost bleeds no-frills airline firms

The concept of low air fare has just got a hard knock with domestic airlines all set to impose the third round of fuel surcharge hike since May 1. This means fares will go up by Rs 750 in three months.

The latest hike "" Rs 100 per trip "" follows the 4 per cent increase in aviation turbine fuel (ATF). Jet Airways has already announced that it will revise the fuel surcharge by Rs 100 per trip. Indian Airlines, Air Deccan and SpiceJet are also likely to follow suit. GoAir and Kingfisher Airlines are thinking on the same lines.

"The concept of low fare is under threat. Moreover, the government is exploring the idea of imposing a cess on air ticket to support HIV/AIDS awareness programmes," industry sources said.

Increasing fuel surcharges and cess are likely to affect demand growth, they felt. India witnessed 7.2 million passenger trips in the first quarter of the current fiscal "" up from five million trips in the corresponding period of last year.

"This growth can be attributed to cheap fares offered by no-frills carriers. Any further increase in fares, in any form, may slow down the passenger traffic," an industry analyst said.

Industry sources pointed out that it will be equally challenging to full service carriers, who are already under pressure, to offer low-fares to take on no-frill carriers.

But low-fare carriers are not ready to buy this argument. Says G R Gopinath, who founded Air Deccan: "The fare offered currently with fuel surcharge and other taxes is much low compared to the level five years ago. For example, the average Bangalore-Delhi fare has come down to Rs 4,500 from Rs 12,000 five years ago."

Raj Halve of GoAir says increasing affordability is driving rapid growth in passenger traffic.