GoAir’s flat-fare move could lead to differential fuel surcharges

GoAir’s flat-fare move could lead to differential fuel surcharges
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First Published: Thu, Jan 10 2008. 12 02 AM IST
Updated: Thu, Jan 10 2008. 12 02 AM IST
Mumbai: Low-fare airline GoAir has dropped fares on the Delhi-Jaipur route below the surcharge airlines in India levy on passenger tickets, potentially triggering a similar move by others if jet fuel prices decline further.
At a time when airlines have been increasing the so-called fuel surcharge, the Mumbai-based Go Airlines India Pvt. Ltd that runs the carrier now offers a flat fare of Rs1,075 for passengers flying from New Delhi to Jaipur, including all taxes and surcharges.
At present, domestic airlines, which have posted some Rs2,000 crore losses the last fiscal year, are charging Rs1,650 as fuel surcharge and Rs150 as congestion surcharge, apart from Rs225 passenger service fees (payable to the government) per ticket. These surcharges are designed to combat the rising costs of fuel and the extra fuel spent when planes hover over crowded airports.
It was not immediately clear whether the Wadia Group-promoted airline would extend this flat fare strategy to other routes as well. The normal fares charged by low-fare carriers on the 40-minute Delhi-Jaipur air-route is nearly Rs2,750 (including surcharges and taxes), while a full-service carrier such as Air India charges Rs6,310.
Siddhanta Sharma, executive chairman of SpiceJet Ltd, a New Delhi-based airline that competes with GoAir, said airlines were planning to introduce differential fuel surcharges for long and short routes. “Since the crude oil prices rose further, we did not introduce the differential surcharge proposal (yet),” he said, adding his airline did not plan to follow the GoAir move for the “time being”.
An analyst said the move by GoAir would be limited since the airline ran a relatively small operation. “This could be a strategy to fill in planes. Since GoAir is not having too many planes in its fleet, other carriers may not follow this strategy by slashing fares by almost 50% at a time when all airlines are bleeding,” Aniket Mhatre, an analyst with broking firm Prabhudas Liladher Pvt. Ltd,said.
“We are certainly evaluating differential fuel surcharges, but nothing has been finalized yet. But I do not think that GoAir’s is a smart move at a time when the crude oil prices are hovering at $100 per barrel,” said Hitesh Patel, executive vice-president of Kingfisher Airlines, a full-service airline that competes with Jet Airways India Ltd.
“Our aggressive pricing strategy in the Delhi-Jaipur sector is in line with our growth strategy to escalate passenger traffic in mini metros,” said Jeh Wadia, managing director of GoAir, in a statement.
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First Published: Thu, Jan 10 2008. 12 02 AM IST