Slipping on oil, airlines may hike fares in Dec | india | Hindustan Times
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Slipping on oil, airlines may hike fares in Dec

india Updated: Nov 19, 2011 11:09 IST
Sachin Dave
Sachin Dave
Hindustan Times
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If you have travel plans for December, be prepared to shell out more for your air tickets. Hoping to make the most of the holiday rush, cash-strapped airlines are said to be planning to hike fares by 20-25% in the Christmas-New Year period.

Rising fuel prices have led to a 40% jump in aviation turbine fuel rates in the past year. Five of the country’s six airlines — Air India, Kingfisher, Jet Airways, SpiceJet and Go Air — posted a combined loss of Rs 2,500 crore in the July-September quarter and are reportedly planning to pass on the burden to passengers. A 25% hike would mean that a Kingfisher Mumbai-Delhi return ticket, which cost Rs 14,468 on Friday, would cost Rs 17,356 in December.

“Airfare for shorter distances, tier 2 and tier 3 cities, will go up the most. We see an across-the-board jump of about 20% as some companies could reach an understanding about increasing fares simultaneously,” said an aviation analyst with an international consultancy firm, on condition of anonymity.

“Ideally, fares should go up when oil import costs go up. That is not happening and that’s why airlines are in this situation,” M Shivkumar, senior vice-president (finance), Jet Airways was quoted as saying by Bloomberg News.

“If we want to remain in the market, we can’t sell tickets below the cost of production. Fuel cost, which is 50% of our total cost, has gone up 43% in the last one year. So, fares should increase by at least 20%,” Go Air CEO Giorgio De Roni told HT.

However, on Thursday, regulator Director General of

Civil Aviation had expressed concern over rising fares and said it was keeping an eye on the situation.

While Kingfisher has not made any profits since its inception in 2005, Jet Airways started booking losses after fuel prices started increasing last year. Even budget airlines SpiceJet and Go

Air slipped into the red this quarter.

In the past, competition kept air fare hikes away. “When we increase the price on a particular route, other companies often don’t, so we are left with no option but to reduce the price,” said Kingfisher chairman Vijay Mallya.

But with all airlines all on the same page now, this might change.