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Air fares may go up by Rs 300

With crude oil prices nudging $100 and state-owned oil cos gearing up to raise jet fuel prices, airlines are planning to hike fuel surcharge, reports Lalatendu Mishra.

india Updated: Nov 25, 2007 21:01 IST
Lalatendu Mishra
Lalatendu Mishra
Hindustan Times

Be prepared to shell out Rs 300 more towards your air fare. With crude oil prices nudging $100 and state-owned oil companies gearing up to increase jet fuel prices by upwards of 8 per cent, airlines are planning to increase the fuel surcharge.

“The fuel surcharge hike should be Rs 300 this time. But it could be slightly less to prevent a drop in demand,” said an airline executive asking not to be named.

In early November airlines had increased the fuel surcharge by Rs 150 soon after oil companies increased jet fuel prices by 4 per cent. Now passengers are paying Rs 1,350 as fuel surcharge apart from Rs 150 as congestion surcharge. In December, the fuel surcharge could be Rs 1,600 or more.

While a section of the airline industry feels that higher air fares will lower demand, others point out current fares are not even half of those charged two years ago. For example a Delhi-Bangalore air ticket used to cost Rs 12,500 two years ago, against Rs 6,000 now.

“The increase in fuel surcharge may moderate demand but not kill it. It will have some impact but the demand-pull is still very high, as people are getting richer,” said Ajay Singh, director, SpiceJet.

At the moment, the airline industry is not in a position to absorb the extra outgo on jet fuel. Despite hectic lobbying, the government is yet to consider doing away with state levies. Indian jet fuel prices are 70 per cent higher than most other countries.