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Source: media reports

Airfares soar again even as growth skids in May

Airfares soar again even as growth skids in May
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First Published: Thu, Jun 19 2008. 10 40 PM IST

Travel woes: Air India aircraft at the Chhatrapati Shivaji International Airport in Mumbai
Travel woes: Air India aircraft at the Chhatrapati Shivaji International Airport in Mumbai
Updated: Thu, Jun 19 2008. 10 40 PM IST
Two of India’s seven airlines raised fares on Thursday even as data on air passenger growth showed a deceleration to 6.8% in May from a 35.7% growth rate in the same month in 2007. Airline executives predicted the number of passengers may even be less than the year-ago period in the months ahead after the summer holiday season ends this month.
Travel woes: Air India aircraft at the Chhatrapati Shivaji International Airport in Mumbai
On Thursday, Jet Airways (India) Ltd, the country’s largest airline group by passengers flown, said it was setting a minimum base fare on its tickets at Rs1,000 on routes less than 750km; Rs2,250 on travel between 750km and 1,000km; and Rs3,000 on all other flights. Base fare is one component of what air passengers pay for tickets and the previous base fare, depending on when the ticket is purchased and the destination, was as low as Rs500 for Jet. Other components of a ticket are levies on airport use and aviation fuel, which add up to Rs3,275 on a flight over 1,000km.
For JetLite Ltd, Jet Airways’ low-cost unit, the base fare will be set at a minimum Rs500 below 1,000km and Rs2,000 above that threshold.
SpiceJet Ltd, the second largest low-cost carrier in India, after refraining from passing on a fuel surcharge hike earlier this month, said it would raise an aviation fuel levy by Rs300 on short-haul sectors and Rs550 on long-haul sectors from midnight Thursday as there was no relief on jet fuel taxes from the government as the airline industry was hoping. Other airlines had effected the increase starting 1 June.
“There is no way out given the current financial situation,” Jet Airways CEO Wolfgang Prock-Schauer said, adding that it is unlikely that prices will come down. “Pricing (in airlines) is a moving target but for the time being that’s what we have to charge. At least in the current environment I don’t see that (fares) coming down.”
Passenger growth continues to be under pressure, meanwhile, according to the latest data released by the Directorate General of Civil Aviation. In May, 41.1 million passenger flew compared with nearly 38.5 million in May 2007.
“I will be happy if (growth) is 0% this month and not negative,” said Samyukth Sridharan, chief commercial officer at SpiceJet, referring to the travel bookings made for the month. “July is going to be negative. Whatever price we are putting in, people are just not buying tickets.”
After a roller-coaster ride which saw the aircraft fleet of scheduled airlines doubling to nearly 392 in three years, airlines now say supply of seats has exceeded demand by 25-30%. And fewer passengers mean airfares, despite being hiked because of fuel surchar-ges, cannot meet input costs.
With mounting losses and not enough willing investors, some of the airlines are left with no choice but to cut down their flights. SpiceJet, for example, which had announced that it will cut 15% of its flights from 1 July, has now told the regulatory authorities that it will cut 20% of its flights, taking the number of daily flights to 94 from 117.
Kingfisher Airlines Ltd’s executive vice-president Hitesh Patel said he “can’t see growth going down to 0%”.
Kingfisher, together with Simplifly Deccan, an airline it is merging with, had a market share of 28.4% for May, trailing behind Jet Airways’ 29.1% share of the market.
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First Published: Thu, Jun 19 2008. 10 40 PM IST