The airline companies in the country are considering a price hike of up to 15% in the total airfare. This is being considered in order to make up for the lost revenue due to increased fuel prices and implementation of GST.
Price of ATF (aviation turbine fuel) has been increasing for quite some time now. On Sunday, the oil marketing companies raised the price of ATF by 6%. This was the third consecutive monthly hike. Last month too, the prices were increased by 4%. On Sunday, the rate of Aviation turbine fuel went to ₹53,045, up ₹3,025 from ₹50,020.
A report by Economic Times quoted an official from a leading airline saying that if companies do not increase the fuel prices now, they will have the same fate as Kingfisher airlines or Air India, both of which had huge debt and the same forced Kingfisher airlines to shut down and Air India still struggling to find a buyer. The reasons for the price hike, according to the above-quoted executive, is the increased fuel prices and weakening of rupee against the dollar.
Implementation of GST is also said to be a reason behind airline companies considering such move. In a report we did last week, the airline companies were reported reaching out to GST council regarding the GST on the import of services engines and spare parts. According to that report, the airline companies were asked to pay huge duties while importing the spare parts and engines back after servicing in the other countries. India does not have any workshop for the repair or servicing of airline engines and that forces the companies to send the spare parts abroad.
The list of added costs to airline companies includes the introduction of regional connectivity cess, under which, the airlines need to pay ₹5000 for each flight originating from specific locations. The same has been introduced from 1st August.
According to the reports, Airlines have not increased the fare for quite some time now. The cheaper fuel prices have enabled the airline companies to offer prices as competitive to 2nd AC and 1st AC trains and hence, the air traffic has increased to as much as 20% in the last few years.