Fuel prices up, air fares to follow

Air fares are set to go up again as airlines contemplate increasing the fuel surcharge in the range of Rs 150-200 per ticket. This is to offset the 3.3 per cent increase in jet fuel prices. On August 1, oil companies hiked jet fuel prices due to the steep increase in global crude oil prices that crossed over $78 a barrel.

This will be the first time that domestic airline companies will be increasing the fuel surcharge twice in a span of little over a month.

On July 3, the airlines had increased the fuel surcharge by Rs 50, taking the total fuel surcharge to Rs 950. Apart from this, they also levy a congestion surcharge of Rs 150.

“We have not taken any decision so far but we will discuss about it in a day or two,” said Jet Airways Executive Director Saroj Datta.

“We are looking at it and will take a decision by tomorrow. If jet fuel prices go up every month, we cannot do much. We have to pass on the additional burden to passengers. How long will we go on bearing losses? But we will wait till others increase their fuel surcharge,” said Ajay Singh, director, SpiceJet.

But Paramount Airways has already decided to increase the fuel surcharge by Rs 100. “Our fuel surcharge will go up from tomorrow or the day after,” said M Thiagarajan, chairman, Paramount Airways.

Indian Airlines executives said they were yet to take any decision.

This time all the airlines are in the process of building a consensus and collectively deciding on the amount of surcharge to prevent migration of passengers to rival carriers.

“Nobody is in the mood to bear any further losses on jet fuel prices. In a scenario of consolidation, when some airlines are coming back to profit, it does not make sense to wait till jet fuel prices come down,” said an airline executive asking not to be identified.

Fuel constitutes about 42 per cent of the operating cost of an airline in India. According to aviation experts, a 1 per cent increase in jet fuel prices puts an additional cost burden of 1.5 per cent on airlines.

First Published: Aug 02, 2007 21:14 IST