Airline Prices Increase

From India:

Mumbai: Rising Indian airfares show no sign of pausing even though airline fuel prices are expected to fall in the coming weeks.

Indeed, the big three airline groups—Jet Airways (India) Ltd, Kingfisher Airlines Ltd and National Aviation Co. of India (Nacil)—are all considering raising fares by between 10% and 20%, airline executives say.

Downtrend: Passengers at the Indira Gandhi International airport in New Delhi. The number of people travelling by air had fallen to 3.04 million in July, down 12.65% from a year ago. Photograph: Madhu Kapparath / Mint

The rest, mainly low-cost carriers, have not taken a decision yet on fares for September and October, but typically follow the lead of so-called full-service airlines.

The potential price hikes come at a time when oil marketing firms have indicated that there will be a downward revision of jet fuel prices, also known as aviation turbine fuel, or ATF, by at least 15% for September, triggered by dropping global crude oil prices.

India’s carriers expect to post a combined loss of $2 billion, or Rs8,680 crore, in 2008-09, primarily due to high prices of jet fuel, which constitute up to 60% of the operating cost of some airlines.

ATF sells in New Delhi at about Rs71,000 a kl, up from Rs69,000 in July. In February, the same fuel sold at Rs45,000 a kl at the Capital’s airport. Fuel costs for India’s airlines have tripled in the past three years.

Jet Airways needs to increase its fares by at least 20% to cover its cost of operations and make a reasonable or small profit, said Sudheer Raghavan, the airline’s chief commercial officer. “We are not bothered about what our competition is doing on fares, but we will be increasing fares in September and October,” he said on the sidelines of an event to launch Jet’s service to Dubai from Mumbai.