Blame jet fuel, air fares may go up

Come March the domestic fares will rise if the Govt does not reduce taxes on air turbine fuel, reports Lalatendu Mishra.

Come March and you could have to pay more for your air travel as domestic air fares rise further if the government does not reduce taxes on air turbine fuel (ATF).

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Last year, the budget hardly provided any solace to the sector except for reducing import duties on smaller planes. This year a lot needs to be done to enable this sector to stay afloat and contribute to the economy's growth. Some profitable airlines are better than having no airline and this cannot be possible without government's support. “Civil aviation is extremely competitive and capital intensive. Though there is potential for demand, aviation has to be profitable to remain in business,” said S Venkat, ED (Finance), Air India.

The promotional fares of Re 1, Rs 9 and Rs 99, which made many first-time fliers, have now vanished as airlines seek to reduce their losses.

At the moment, the minimum fare excluding taxes is Rs 500 and this could go up to improve the yields. Airlines are now slowing down their capacity induction to bridge the demand-supply gap, which would result in higher air fares, say analysts.

Though the ongoing consolidation in the aviation industry is yet to yield any concrete results, it would bring down the combined losses in the coming financial year due to an emphasis on cost control.

Aviation consultancy The Centre for Asia Pacific Aviation in its forecast for 2008 has said the Indian aviation sector, with a collective loss of $700 million by March 31 would reduce the loss to $400-500 million in 2008-09.