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Air travel set to become costlier as aviation fuel price is raised

Air travel set to become costlier as aviation fuel price is raised
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First Published: Tue, May 01 2007. 12 08 AM IST

Updated: Tue, May 01 2007. 12 08 AM IST
New Delhi: One Indian airline raised ticket prices and others looked set to follow suit, after the government-owned oil marketing firms increased the price of aviation turbine fuel (ATF) with effect from Tuesday. Analysts tracking the oil and gas sector, who did not wish to be identified, said that in the background of rising crude prices, and government-imposed curbs on the pricing of kerosene, petrol, diesel and liquified petroleum gas, the oil firms had no option but to increase the price of ATF in an effort to protect their profits.
A senior executive at Jet Airways, India’s largest airline, said the company had decided to increase the fuel surcharge on tickets by Rs150. And several other airline executives said their companies would do the same. Fuel surcharge on tickets is currently at Rs750. A. Raghunathan, chief financial officer, Kingfisher Airlines, said, “We have to look at jacking up the fuel surcharge to handle this kind of problem.” He said since this was the peak season, Kingfisher would hold talks with other airlines so that the hike would be common across the board. Raghunathan added that a decision to this effect would likely be taken before the end of the week. “A hike in surcharge is definitely warranted this time since last month we did not increase the surcharge even as fuel prices increased. We will be taking a decision by tomorrow evening,” said Ajay Singh, director, SpiceJet .
From Tuesday, prices of ATF will increase by between 3.14% and 3.54% across the four metros for domestic airlines. International airlines, which refuel in India, will end up paying between 9.6% and 9.9% more (the duty structure on ATF for international airlines is different than those for domestic ones; these airlines also pay in dollars, which has depreciated against the rupee). For domestic airlines, ATF will cost Rs37,421.94 per kilolitre in Delhi compared with Rs36,149.40 per kilolitre last month. For international airlines, the price will be $707.12 (Rs28,991.92) per kilolitre in Delhi compared with Rs27,030.78 per kilolitre last month. ATF prices are revised at the beginning of every month.
This hike spells bad news for airlines; aviation fuel comprises 30-35% of airlines’ total operational cost. A spokesman for the Federation of Indian Airlines (FIA), a union of nine domestic airlines, said that the increase in ATF prices was in the direction “away from where the airlines would have liked to go”. FIA has been making presentations to the ministry of petroleum and natural gas asking for a reduction in the base price of ATF. “In earlier instances also, they have been non-transparent in the way ATF is priced and it is not clear whether this increase in prices is because of global crude oil price movement, or for some other reason,” an FIA spokesperson said.
Indian Oil Corporation, the country’s leading ATF retailer, sells around four million tonnes per annum.
utpal.b@livemint.com
Sagar Malviya contributed to this story.
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First Published: Tue, May 01 2007. 12 08 AM IST
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