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Airfares head north

AIR TRAVEL in India is all set to become costlier from November. Most airlines have been making losses, and they cannot take it any more. With more airlines being launched, and the growing competition between them, all had reduced their fares to unsustainable levels.

india Updated: Oct 24, 2006 14:52 IST

AIR TRAVEL in India is all set to become costlier from November. Most airlines have been making losses, and they cannot take it any more. With more airlines being launched, and the growing competition between them, all had reduced their fares to unsustainable levels.

With the peak season beginning next month, airline officials feel it is the best time to hike fares and cut losses. The extent of the hike is yet to be decided. In fact, airfares had begun creeping up already.

"Even on low-cost airlines, the last-day fare on the Delhi-Mumbai sector was over Rs 7,000, which is almost the amount charged by a full-service airline," said the chief executive officer of a low-cost carrier, who did not want to be identified. In low-cost airlines, fares depend critically upon when the ticket is bought -- the further away the journey date, the lower the fare.

Top officials of airlines, who met in Mumbai last week to form the Federation of Indian Airlines, discussed several formulae to ensure that the fares do not come down below a certain "floor level". "One option considered was to increase the fuel surcharge. But it was eventually rejected because the international crude prices have lately been declining.

By what logic would we explain the increase in surcharge?" asked a CEO of a full-service airline present at the meeting.
Another formula put forth was to calculate the minimum price on any sector on the basis of two rupees per km along with Rs 750 as fuel surcharge and the airport tax of about Rs 250. But none of them found a consensus.