Domestic airfares may surge with aviation fuel prices

Our Bureau New Delhi | Updated on March 17, 2011 Published on March 15, 2011

Need to hike fares: The Chairman and Managing Director, Kingfisher Airlines, Mr Vijay Mallya, with the Secretary of Civil Aviation, Dr Nasim Zaidi (second from left), the Chief Executive, International Airlines group, Mr Willie Walsh (second fromright), the Executive Director, Bird Group, Mr Ankur Bhatia (right), and the Chief Executive Officer, SpiceJet, Mr Neil Raymond Mills (left), at the valedictory session of ’India aviation meet - Creating economically viable, sustainable and inclusive aviation sector: The agenda ahead’ in the Capital on Tuesday. — Kamal Narang

Domestic airfares could be hiked soon owing to high oil prices. Low-cost carrier, SpiceJet said on Monday that it would need to increase its fares by Rs 600-700 to offset the high cost of aviation turbine fuel (ATF).

“At current levels of crude oil prices, we would need to hike (fares) by around Rs 600—700 rupees to break even,” SpiceJet. Chief Executive Officer Mr Neil Raymond Mills told reporters on the sidelines of a CII meet on aviation.

The low-cost air carrier had already raised prices by an average Rs 200 per ticket. “But, this is just the beginning. We are reviewing the prices on a daily basis,” said Mr Mills.

Kingfisher Airlines’ Chairman Mr Vijay Mallya said that the airline has already been passing on the increasing fuel cost burden to passengers and it will continue to do so. “Despite this, there has been no reduction in load factors,” Mr Mallya told reporters.

Since Jan 1, aviation fuel prices in Delhi have gone up by Rs 7,118 per kL due to the spurt in global crude oil prices. Jet fuel costs account for about 40 per cent of an Indian carrier’s operational expenditure.

Meanwhile, Civil Aviation Secretary, Mr Nasim Zaidi said that the Ministry will speak to the Finance Ministry to ease the cost burden on airlines.

“The Ministry of Civil Aviation is well aware of the unfavourable fiscal environment for civil aviation. The Ministry will take up the issue of the recent hike in Service Tax with the Finance Ministry. We will also take up the issue of high taxes on ATF and we are in favour of including ATF under Goods and Services Tax (GST),” said Mr Zaidi.

The Civil Aviation Secretary also added that the Ministry of Civil Aviation has received a request from Department of Industrial Policy and Promotion regarding giving permission to foreign airlines’ investment in India which is under consideration and a decision on this would be taken soon.

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Published on March 15, 2011
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