Air fares set to soar as jet fuel prices rise

Prices see steepest rise in May

MUMBAI/BANGALORE: Airfares are all set to move up again this month as the aviation turbine fuel (ATF) prices touched a new high on Saturday.

And this month, the hike in fuel surcharge (on account of rising ATF prices) could well be the steepest with jet fuel prices climbing up between 18 and 19.5 per cent across various cities.

“That’s quite steep. We have not yet worked out how much the fuel surcharge will go up. The important issue is that with rising input costs, we have no option but to pass it on to passengers,” said budget carrier Deccan CFO Ramki Sundaram.

Last month, ATF prices had shot up by around 10 per cent, which had spurred airlines to increase the levy by Rs150 per ticket on short haul sectors (less than 750 km) and Rs350 on long haul sectors (more than 750 km).

The current fuel charge is already very high at Rs1,950 on short haul and Rs2,350 on long haul sectors.

Besides the fuel surcharge, airlines are also imposing other taxes like congestion surcharge (Rs150), service fee (Rs225) and a transaction fee on online bookings (Rs50-100).

This has taken the total tax component in today’s airfare to Rs2,825 on longer routes and Rs2,425 on shorter flights. And this will go up further this month.

Analysts say the increase in fuel surcharge in June could be twice the hike in May. “On a linear basis, yes it should be proportionate to the rise in ATF prices but since the base is growing bigger, it could be more than proportionate hike,” said an analyst with a domestic broking firm.

This means that flyers can brace themselves for an increase in fuel surcharge of between Rs300 and Rs800 per ticket. Airlines will be taking a collective decision on the issue on Monday.

Air India executive director Jitender Bhargava said fuel surcharge would be hiked by Rs300 on flights up to 750km and Rs550 on long-haul flights. “We are passing on only part of the liability that the prices inflict.”

This takes the current fuel levy to Rs2,250 on short-haul flights and Rs2,900 on long-haul flights, while tax in the ticket moves up Rs2,725 and Rs3,375.

Saroj K Dutta, executive director of Jet Airways said, “We haven’t taken a decision. We will decide on Monday.” But a senior official of a leading low-cost carrier said balance-sheets are not strong enough to absorb any portion of the hike.