New Delhi: Low cost airline SpiceJet Ltd, which flies one of every 10 passengers in India, has shuffled its airfare structure by reducing fuel surcharge on tickets, the biggest component in ticket prices, by up to Rs700 per ticket, or 26%, but made up that decrease by raising the base fare on a ticket.
The result: Overall ticket prices remain unchanged.
An airline ticket typically has a base fare, a passenger service fee of about Rs225, fuel surcharge and a so-called user development fee. Of these, the passenger fee goes to the government to pay largely for security, the user development fee is collected for the airport operator, while fuel surcharge and base fare are part of airline’s revenue.
SpiceJet, India’s second ranked low cost carrier by passengers, behind rival InterGlobe Aviation Pvt. Ltd-run IndiGo, has reduced the fuel surcharge from Rs2,700 to Rs2,000 for tickets flying distances more than 750km— those such as New Delhi-Mumbai, for instance—while flights under 750km will now invite a fuel surcharge of Rs1,500, 23% less than Rs1,950 charged earlier.
But, base fares have been increased in proportion, said SpiceJet chief commercial officer Samyukth Sridharan, declining to give more details.
It was not immediately clear why the changes had been made, but it may be related to a directive from aviation regulator Directorate General of Civil Aviation last month. It had then asked domestic airlines to make it clear, on its tickets, charges accruing to them instead of grouping fuel surcharge and passenger service fee as taxes which “gives an impression to the travelling public that high airfare are due to government taxes”.
An expert interpreted the SpiceJet move as one to move to a simpler, consolidated ticket price rather than have various components in it. “I can only think that they are gradually wanting to remove the fuel surcharge and move to one consolidated fare,” said Kapil Kaul, India chief executive of aviation consultant Centre for Asia-Pacific Aviation.
Fuel surcharges increased from Rs900 on a ticket when jet fuel sold at Rs37,421.90 a kl in May 2007 to Rs2,350 a year later when the fuel cost Rs58,387.92 a kl. The levy then peaked close to Rs3,000 when jet fuel prices soared to Rs71,028.26 per kl in August last year.
Since then, jet fuel prices have been scaling down. Aviation turbine fuel is now at Rs27,275 a kl, less than the retail price of diesel.
International airlines such as AirAsia Bhd have discontinued charging fuel surcharge since mid-November 2008 on cheaper jet fuel prices explaining then that it will help passengers “compare prices more easily and needn’t have to worry about the difference quoted between seat fare and the final amount” paid.
The latest SpiceJet move, said a senior executive at a travel portal, could be another way for airlines to play with fares to stoke demand as it gives them more scope to reduce or decrease base prices. Airlines do not change fuel surcharge on a daily basis but usually all airlines follow the same fuel surcharge patterns.
Shares of airlines rallied on Wednesday, continuing a run that began Monday after the firms reported better passenger numbers in February. SpiceJet shares rose 4.48% to Rs14.47 on the Bombay Stock Exchange, while those of Jet Airways (India) Ltd shot up 15.21% to Rs175.70. The Kingfisher Airlines Ltd scrip also jumped 7.36% to Rs32.80 each on a day the Sensex moved up 1.27%.