After fuel price cut, Patel sees air fares coming down in Dec

After fuel price cut, Patel sees air fares coming down in Dec

New Delhi: Aviation minister Praful Patel has predicted that air fares in the country will start falling from mid-December and expects that within six months they will “be back to normal", driven by falling fuel prices and a higher number of passengers on planes.

Despite last week’s one-sixth decrease in aviation fuel prices and a near 4% cut in the fuel’s price earlier this week with the removal of excise duty, none of India’s airline firms has dropped fares yet, after months of raising them to combat an unprecedented and record rise in the cost of fuel earlier this year.

“The fares should be back to what they were in another six months," Patel said on Wednesday.

An aviation analyst agreed with the minister’s forecast. “At present, the country’s airlines are not only suffering from losses due to high operating costs but also very low load factors," said Gurinder Pal Singh Arora, senior manager at consultant KPMG. “Around late December, fares will start coming down as incoming international traffic will increase thereby increasing the number of passengers flying."

The money saved from lower aviation fuel prices can be used to provide discounts on tickets and stoke traffic, he added.

This is the first time Patel has made a forecast on airfares; in the past, he has said that he does not like to comment on internal commercial decisions of the country’s airlines.

“He may be trying to say that if the government is trying so hard and doing so much for the aviation sector, then they should also consider the passengers that the government wants to benefit from the initiatives. They should also cut the fares and get the passengers back to travelling by air," KPMG’s Arora said of Patel’s statement.

The sector expert, however, held a different view on when airfares will reduce to levels of last year when tickets between Delhi and Mumbai could be purchased for some Rs3,000 compared with the minimum Rs4,000-odd today. “I don’t think they will fall more than 10% (at a time)," he said. “Maybe, by the end of next year we will see fares back to what they were."

Airline firms argue that even after the decrease in aviation fuel prices, it is still around 50% more than the prices a year ago.

“There are two things that essentially govern fares for the aviation industry. A large part of the tariff depends on fuel. If fuel stays at the $50 (Rs2,385) to $75 that it has been hovering around over the past three weeks then that gives us a cue to relook at our fares and make a change," said Samyukth Sridharan, chief commercial officer, SpiceJet Ltd. “Another thing is the reduction and or removal of the various taxes that are charged on ATF." ATF is short for aviation turbine fuel price.