Air fares likely to be up as ATF price rises

NEW DELHI: Air fares are set to rise again due to an increase in the price of aviation turbine fuel (ATF). Almost all airlines plan to hike fuel surcharge by Rs 150 per sector over the weekend.

Budget carriers currently levy about Rs 1,200 as fuel surcharge. Most airlines, including IndiGo, Air India, SpiceJet and Air Deccan, are expected to increase the fuel surcharge to Rs 1,350 per sector, sources said.

Industry sources said public sector oil marketing companies, such as IOC, increased the price of ATF by 4% to Rs 41,417.33 per kilolitre on Thursday. This is the eighth increase in jet fuel price this year, mainly on account of the rise in crude prices globally. The price of ATF rose by Rs 1,691.25 per kilolitre in Mumbai after the current hike.

“We are evaluating the impact of the hike in ATF price on fares. We would figure out the quantum of hike in fuel surcharge today. Normally, we increase the fuel surcharge a day or two after the ATF price is increased,” Kingfisher Airlines executive vice-president and CFO A Raghunathan said. Senior officials of most airlines are of the view that the current hike in ATF prices necessitates a hike of Rs 150 in fuel surcharge.

All airlines are unanimous that the increased fuel cost burden should be passed on to fliers and instructions are expected to be issued to the travel trade in a day or two. “Logically, there should be a fare hike due to increased fuel burden on airlines. We are working on an increase in the fuel surcharge, but a final decision would be taken by all the airlines together. We have been doing this historically. In most cases, we try to absorb the maximum cost burden while sharing it partially with customers,” said SpiceJet vice-president (marketing and planning) Kamal Hingorani.

“The fuel surcharge would certainly go up due to extra fuel cost, but it should not increase beyond Rs 150,” an Air Deccan executive said.Hike in jet fuel price comes at a time when the civil aviation minister is trying hard to convince various states to rationalise sales tax and bring the fuel cost down to international levels. ATF in India is currently about 65% costlier than the average international price.