Air fares likely to go up by 5-8%

There could be bad news for air travellers this summer. Domestic airlines such as SpiceJet, Kingfisher Airlines, Jet Airways and Paramount Airways are likely to increase air fares by 5-8% per ticket from mid-April due to a sharp increase in price of aviation turbine fuel (ATF). Delhi-based low-cost carrier SpiceJet will hike fares by 5% over the next two weeks, CEO Sanjay Aggarwal confirmed. “As ATF rates have gone up by 10%, airlines need to increase fares to partially mitigate the jet fuel price increase. We have decided to increase air fares by 5% on the total fare, which will be implemented mid-April,” said Mr Aggarwal. ATF prices have increased by an average of Rs 2,750 per kilolitre (10%) on April 1 in Delhi, making it the second such hike in 15 days. In Mumbai, the country’s busiest airport, ATF rates were raised to Rs 30,785 per kl, from Rs 28,023. Kingfisher Airlines chairman Vijay Mallya said: “If jet fuel prices go up, we’ll look at adjusting fuel surcharge...but so far so good. If there is another hike in ATF, we may have to revisit the issue. Kingfisher will pass the increased cost to consumers because the airline cannot absorb this cost.” After the proposed hike, a Mumbai-Delhi ticket of SpiceJet would cost Rs 4,807, including taxes. Kingfisher and Jet Airways fares for the same route will be around Rs 5,925, all inclusive. It has been learnt that Jet Airways has called an internal meeting to discuss the air fare issue after the sudden rise in ATF prices in India and globally. A Jet Airways spokesperson said no decision has been taken as of now. Paramount Airways MD M Thiagarajan said: “There could be a marginal increase in fares, but the company has not made a final decision yet.” Analysts said increase in ATF and the falling rupee are denting domestic airlines’ bottomline. Around 30% of an airline’s operational expenses are denominated in dollars, whereas 50% of the operational cost is accounted by jet fuel. ATF spot prices have soared by about 23% in Singapore in the past week. It rose by 19% in the US Gulf Coast, 17% in New York and Los Angeles, and 15% in Amsterdam. Crude oil prices touched $50 a barrel on Thursday rising steadily from $35 in February.