The Hindu Business Line : Airline fuel surcharge may rise due to hike in ATF prices

The fuel surcharge levied by the domestic airline sector is likely to see an upward movement, with the state-owned oil companies raising the aviation turbine fuel or jet fuel prices by 2.86 per cent.

Indications are that the aviation companies are informally talking about a possible increase in fuel surcharge.

According to industry sources, the fuel surcharge could see an increase of about Rs 50.

However, the players in the sector seem to be waiting for each other to make the first move.

Air Deccan is believed to be planning an increase in fuel surcharge by Rs 50 to Rs 1,000. Sources indicated that the ATF hike is likely to translate into a marginal increase in passenger tariff, depending on the sector.

Players are in the process of studying the impact and “based on the findings, a fare hike would be considered.”

The increase in passenger tariff could range from 0.5 per cent to 1.5 per cent.

Explaining the impact on consumer fares, a Kingfisher Airlines official said that even if the fare price is zero, a passenger ends up paying a total of Rs 1,325 per ticket – comprising fuel surcharge of Rs 900, congestion charge of Rs 150 (Indian does not charge this levy) and Rs 225 as passenger service fee, which goes to the Airports Authority of India.

In line with rising international crude prices, the oil companies have announced a hike in ATF prices by Rs 1,053-1,244.8 per kilolitre from July 1.

According to oil company officials, the increase is because f.o.b. (free on board) prices and operating costs have gone up.

The f.o.b. cost structure involves the production cost plus any transportation costs to the customers.

This implies that customers located nearby will have to shell out lower overall cost.

Aviation fuel prices are revised at the beginning of every month based on the average international price in the previous month.