New Delhi: Air India on Thursday hiked passenger fares up to 23-25 per cent on all domestic routes following a sharp increase in the price of air turbine fuel (ATF). It may also raise fares on international routes. "We have hiked fares by 23-25 per cent on all domestic routes. This has been done to offset the recent increase in ATF price," an Air India official said.
The rupee depreciation is also a big concern for the airline, said the official, as it has affected the margins of its international operations. "Going forward, there might be an upward revision in fares for international routes," the official said. Currently, on domestic routes, Air India has a passenger load factor of 82 per cent. The official said the company was optimistic that it would maintain its market share despite the fare increase and that pre-booking by passengers had ensured a high load factor during the festive season. Air India had the third highest domestic market share in July at 19.2 per cent.
On Wednesday, Jet Airways raised fares by up to 25 per cent. Budget carrier SpiceJet earlier increased fares by 25 per cent. The hikes come after the three state-owned oil marketing companies, which revise jet fuel prices on the first day of every month, hiked fuel prices by 6.9 per cent for purchases from September 1. This was the fourth hike since June due to the fall in rupee value. "There are multiple factors at play in this significant increase in air fares, ranging between 15-25 per cent, across sectors," said Sharat Dhall, president, Yatra.com.
"The effect of the depreciating rupee, the hike in the aviation turbine fuel prices, significant pre-bookings via promotions, have all led to a sudden rise in air fares this time," said Dhall. Fuel prices comprise about 50 per cent of the operating costs of airlines in India and have dented the sector as major airlines bleed under the high state sales tax regime. Currently, ATF sold in the country is nearly 50-60 per cent costlier than in overseas markets like Bangkok, Singapore or Dubai. There has been a longstanding perception that ATF, which is a super-refined form of kerosene, should not be subsidised for air travel.
The government currently subsidizes sensitive products like diesel, LPG (liquefied petroleum gas) cylinders and kerosene. The high fuel cost and weak economic environment also led SpiceJet in reporting a 10 per cent fall in net profit in the first quarter of this fiscal, which stood at Rs 50.55 crore, down from Rs 62.44 crore in the corresponding quarter of 2012-13. Jet Airways reported a net loss of Rs 355.38 crore in the first quarter of the current fiscal, from a net profit of Rs 24.70 crore in the same period of 2012-13.
