Further fare hikes in the offing, say airlines

Sources in Spice Jet say that the hike in the fares announced yesterday will meet only half the increase in cost per seat and they have to look at ways to increase fares especially if oil prices go up again.  "We have not been able to make an assessment of what how much our yields will exactly increase as a result of these fare hikes. We will be able to take a firm decision on after the fares are in the market for sometime. But going by the current situation, we might increase our fares next month itself if further increase in the oil prices are announced by the end of this month," said a Samyukth Sridharan, Chief Commercial Officer, SpiceJet.

Airline companies say they are treading a very thin line as while fuel price hike have dramatically increased costs they have to increase price cautiously or face de-growth in the industry. According to Jet Airways CEO, Wolfgang Prock-Schauer, "The last increases in the price of the ATF  from March till June has added  $100 million additional costs on a monthly basis amounting to $1.2 billion annual costs for the industry as a whole just on the account of the ATF added within a couple of months.

Airlines are finding it difficult to make good or compensate this cost from the revenues and also it is not possible to make good or compensate the losses with a hike in the fares as too much hike will lead into a negative growth." 

State owned carrier Air India is also worried. "The situation looks pretty bad as of now. And we will have to increase our ticket prices in line with the rest of the market if there is another oil price increase," said Anita Khurana, director, commercial, National Aviation Company of India Limited (NACIL), the company formed after the merger of Air India and Indian Airlines.
 
According to Vijay Mallya, promoter, Kingfisher Airlines, "It is inevitable if the prices of the ATF hike further, we will have to raise fares," he had said in Mumbai post the meeting of airline companies a few days ago.

Air ticket prices, inclusive of the basic fare, fuel surcharge and other taxes have increased by around 140 per cent for long haul routes and about 100 per cent for short haul routes from the beginning of 2007 till now. The most recent increase of around 5-20 per cent was announced yesterday

However, at projected losses of $2 billion for the industry for 2008-09, India would account for 34 per cent of the total estimated global losses, even as it accounts for 2 per cent of the global aviation industry.