Estimates trotted out by airlines mention that it ticket prices will be 15% — or even more – expensive
PRAVASISAMWAD.COM
The next time NRIs visit home and want to fly around the country, they will have to spend more. Estimates trotted out by airlines mention that it ticket prices will be 15% — or even more – expensive.
The major reason for the hike in ticket prices is the price of Air Turbine Fuel (ATF). Oil majors in haver raised the price of ATF by more than 16% and since jet fuel makes up more than half the operational costs of airlines in India, there is no option but to raise ticket prices.
Oil companies raised ATF prices by 16.3% on June 16. That has taken jet fuel prices to a record high of Rs 1.41 lakh per kilolitre in Delhi. Factoring in the depreciating rupee, ATF is set to increase the cost of operations for airlines leading to high ticket prices.
Raising fares is going to be a major challenge. The travel industry points out that fares are already about 50% higher than last year, and any further hikes would impact demand
ATF constitutes up to 50% of the cost of operations for airlines – all the Indian carriers have been finding it hard to exist in the high-cost environment and demand for lower fares in the country.
Added to that is the fact that airlines have been facing challenges due to the fall in the value of the Rupee which is 5.7% weaker since June 2021 against the US$. Airplane lease rentals, payments to foreign airport operators and expat pilots all have to be paid in dollars.
The aviation industry had wanted the government to lower fuel prices through a cut in excise duty on ATF or by bringing jet fuel under GST. That would have lowered prices and allowed airlines to claim input credit tax on the GST paid.
Today, however, bringing ATF under GST seems a far cry. The Aviation Ministry had requested the Finance Ministry to reduce excise duty on jet fuel by 2 percentage points to 9 per cent but the Finance Ministry has not lowered any taxes on ATF.
There will be an immediate impact on customers. SpiceJet chairman Ajay Singh, in a statement, has said that they will have to pass on the increase in ATF prices to fliers that will lead to an increase of up to 15% in fares. However, industry watchers say that it could be even higher.
For airlines, raising fares is going to be a major challenge. The travel industry points out that fares are already about 50% higher than last year, and any further hikes would impact demand.
********************************************************
Readers
These are extraordinary times. All of us have to rely on high-impact, trustworthy journalism. And this is especially true of the Indian Diaspora. Members of the Indian community overseas cannot be fed with inaccurate news.
Pravasi Samwad is a venture that has no shareholders. It is the result of an impassioned initiative of a handful of Indian journalists spread around the world. We have taken the small step forward with the pledge to provide news with accuracy, free from political and commercial influence. Our aim is to keep you, our readers, informed about developments at ‘home’ and across the world that affect you.
Please help us to keep our journalism independent and free.
In these difficult times, to run a news website requires finances. While every contribution, big or small, will makes a difference, we request our readers to put us in touch with advertisers worldwide. It will be a great help.
For more information: pravasisamwad00@gmail.com