Indian carriers hike fares amid slowing passenger growth

Indian carriers hike fares amid slowing passenger growth
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First Published: Fri, Aug 01 2008. 09 08 AM IST

Fuelling unease: Fuel now accounts for up to 60% of costs at Indian carriers, say airline executives. Photograph: Madhu Kapparath / Mint
Fuelling unease: Fuel now accounts for up to 60% of costs at Indian carriers, say airline executives. Photograph: Madhu Kapparath / Mint
Updated: Fri, Aug 01 2008. 09 08 AM IST
New Delhi: India’s two biggest airline groups by passengers carried, Jet Airways India Ltd and Kingfisher Airlines Ltd, will increase their so-called base price on tickets from Friday, a day after state-run oil firms marginally raised prices of jet fuel for August.
Jet Airways said late evening it will hike fares by 10% on economy seats and 5% in business class, while Kingfisher, which is merging with Deccan Aviation Ltd, will raise prices by 10% across the board, airline executives said.
Fuelling unease: Fuel now accounts for up to 60% of costs at Indian carriers, say airline executives. Photograph: Madhu Kapparath / Mint
The proposed price increase, said a spokeswoman for Jet Airways, was “a commercial increase” and not linked to the air surcharge, in a business that has seen the number of people travelling by air decline and the lean travel season set in.
Air fares in India comprise the base fare and levies such as fuel surcharge and a so-called congestion surcharge to offset the extra fuel burnt when planes are forced to circle above crowded airports.
India’s main oil retailers led by Indian Oil Corp. Ltd decide the price at which to sell jet fuel in the coming month based on foreign currency rates and crude oil prices.
After Thursday’s decision, jet fuel went up by 2.8% at Rs71,028.26 a kilolitre from Rs69,097.19 per kilolitre in New Delhi. In February, the fuel sold at Rs44716.49 a kilolitre at the capital’s airport. Fuel costs have tripled in the past three years, now accounting for up to 60% of costs at Indian carriers, according to airline executives.
It was not immediately clear whether other airlines would also increase fares but, earlier in the day, airline officials told Mint they would wait and watch.
An Air India official, who declined being named, said the carrier will not “jump into increasing fares with the load factors being what they are.”
The number of passengers carried by India’s airlines declined 3.8% to 3.5 million in June, traditionally a strong month in the aviation business, from 3.64 million a year earlier, according to data released by the Directorate General of Civil Aviation.
“I think we will not be pushing up the prices (of tickets). It’s a minor increase so prices will more or less remain the same,” said M. Thiagarajan, managing director of Paramount Airways Pvt. Ltd, which runs 54 daily flights in southern India.
“We are clearly not increasing it tomorrow,” said Samyukth Sridharan, chief commercial officer at low-fare airline SpiceJet Ltd, adding that the carrier will review any increase in the fuel surcharge by next week.
“Given that the ATF (jet fuel) price is going up again, we will not be considering reducing our fuel surcharge; but neither have we made a decision to increase it,” said InterGlobe Aviation Pvt. Ltd-run IndiGo’s chief executive Bruce Ashby.
PTI contributed to this story.
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First Published: Fri, Aug 01 2008. 09 08 AM IST