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Air fares set to rise in 2008

Airfares are set to go up further in 2008 due to consolidation as well as rationalisation in capacity addition in the sector, reports Lalatendu Mishra.

india Updated: Jan 01, 2008 01:11 IST
Lalatendu Mishra
Lalatendu Mishra
Hindustan Times

Airfares are set to go up further in 2008 due to consolidation as well as rationalisation in capacity addition in the sector.

In the next 3-4 months, which is considered to be a lean period in the industry, fares could stabilise even though oil prices are expected to come down. Airline officials, however, feel that fares would start moving up by 5-7 per cent around April and May putting pressure on fliers.

The fuel surcharge that is now being charged as a tax would be included in the fare and the pressure on all airlines to improve their yields would prevent them from offering huge discounts on fares.

Now that Kingfisher Airlines and Jet Airways have acquired Deccan and Air Sahara respectively, there would be a constant endeavor by both airlines to harden fares to arrest losses. The exiting low cost carriers would also want make money and come out of losses as soon as possible.

The fall out of the consolidation process has already begun with most airline operators hiking their fares from August onwards. In September 2006, airlines levied a fuel surcharge of Rs 750. And, as ATF prices started moving up, airlines frequently increased the surcharge. As on December 2007, the fuel surcharge was Rs 1,650. In addition to this, airlines have also been charging a congestion surcharge of Rs 150 from mid-2007. All passengers also pay an additional Rs 225 as passenger service fee that goes to the government and the airport operator.

As fares move up, there is fear of losing passenger traffic, which could compel airlines to sell tickets at a discount. But airlines are hopeful that with enhanced on-board passenger service and increased focus on corporate passengers, the loss of impulse and leisure travelers can be taken
care of.

But a real bargain hunter would always have his/her way, as few tickets would be certainly offered for a song as a marketing gimmick. A marked reduction in ATF prices could change the ball game all together.