Fuel surcharge to be clubbed with base air fare

Fuel surcharge to be clubbed with base air fare

Mumbai: India’s aviation regulator, Directorate General of Civil Aviation, or DGCA, has asked domestic and international airlines to abolish fuel surcharge and include it in the base fare, two officials with the regulator said.

The move would push up costs for airlines as the 3% commission that they pay travel agents on base fares would now have to include the fuel component as well. Currently, airlines list fuel costs under the ‘YQ’, or tax category, which is excluded from the 3% commission paid to travel agents on base fares.

“Airlines are showing the fuel surcharge under the ‘YQ’ head, which is meant for taxes paid to the government. But in the case of fuel surcharge, no taxes are paid to the government," said a senior official at DGCA. “Therefore, airlines were asked to club both basic fare and fuel surcharge."

As a first step, DGCA has asked airlines to start listing a detailed break-up of fares for their passengers.

“Airlines are falling in line and we believe airlines will soon club fuel surcharge with basic fares," the official said.

The direction was given at a meeting with airlines on Wednesday, chaired by director general of civil aviation, Nasim Zaidi. Mint could not reach Zaidi despite repeated calls to his cell phone. The two DGCA officials who spoke on this development did not want to be identified as they are not authorized to speak with the media.

Jet fuel prices, which account for 35-40% of an airline’s operations costs, increased 10.5% in the April-June quarter from the preceding three months.

Airlines have used the fuel surcharge as a common measure to increase ticket prices corresponding with increasing jet fuel prices.

“There is no rationale for imposing fuel surcharge component, an arbitrary amount which is being artificially arrived at," said Ajay Prakash, national general secretary, Travel Agents’ Federation of India.

For instance, Jet Airways (India) Ltd, the country’s largest carrier by passengers carried, is charging between Rs2,600 and Rs3,400 as fuel surcharge on flights in the Delhi-Mumbai route for 2 September, as per listings on its website.

Its base fare for September flights ranges from Rs200 to Rs5,000.

Delhi-based low-fare carrier SpiceJet Ltd lists Rs2,000 as fuel surcharge for a Mumbai-Delhi flight on 2 September, with base fare at Rs196.

For the same date and route, state-owned National Aviation Co. of India Ltd, which runs Air India, is charging fuel surcharge ranging from nil to Rs3,100.

“Airlines are telling that they should tweak their systems to club fuel surcharge with basic fare. We are expecting a positive development by this month end," said Anoop Kanuga, chairman western region, Travel Agents Association of India.

The meeting on Wednesday was attended by foreign carriers, too, including Air France, Singapore Airlines, Qatar Airways and Air Mauritius.