 "Airlines may go for another round of fare hikes as crude prices bite")
Airlines may go for another round of fare hikes to offset the cost of rising fuel prices, a senior executive of a private airline said on Wednesday.
This was in response to state oil marketing companies decision to increase the price of aviation turbine fuel by 18 per cent to record Rs 1.10 lakh for a kiloliter. Fuel accounts for over 40 percent of airline’s expenses and the latest jet fuel price hike will increase overall expenses of airlines by 7-8 per cent.
The latest hike in jet fuel price comes against the backdrop of Russian invasion of Ukraine. Russia is the second largest exporter of crude oil with a global share of 11-12 per cent. However, the country is now facing sanctions from multiple governments making trade deals difficult.
“There is a massive jump in fuel prices. Rupee too, has weakened against the dollar. Ticket prices have to improve. Fares for immediate travel are up 10-12 per cent over last month and should increase further,” he added.
The government has set minimum and maximum fares for domestic flights and these are applicable upto a fortnight. For booking beyond 15 days airlines are free to set their own fares. Fares for travel beyond 15 days are up by almost 30 per cent on some routes. Apart from cost pressure, strong demand too is driving up the fares.
“We note that this is for the first time in our assessment that air fares are 20% or more expensive than comparable 2 AC air-conditioned rail travel even for journeys planned more than a month out. In pre-Covid times, air travel used to be comparable to 2 AC rail fares two weeks out and 20-30 per cent cheaper 4-6 weeks out,” Kotak Institutional Equities Research said in its recent report.
It expects domestic airlines to persist with high current fares for some time before reassessing their pricing.
One subscription. Two world-class reads.
Already subscribed? Log in
Subscribe to read the full story →*Subscribe to Business Standard digital and get complimentary access to The New York Times
Smart Quarterly
₹900
3 Months
₹300/Month
SAVE 25%
Smart Essential
₹2,700
1 Year
₹225/Month
SAVE 46%
*Complimentary New York Times access for the 2nd year will be given after 12 months
Super Saver
₹3,900
2 Years
₹162/Month
Subscribe
Renews automatically, cancel anytime
Here’s what’s included in our digital subscription plans
Exclusive premium stories online
Over 30 premium stories daily, handpicked by our editors
Complimentary Access to The New York Times
News, Games, Cooking, Audio, Wirecutter & The Athletic
Business Standard Epaper
Digital replica of our daily newspaper — with options to read, save, and share
Curated Newsletters
Insights on markets, finance, politics, tech, and more delivered to your inbox
Market Analysis & Investment Insights
In-depth market analysis & insights with access to The Smart Investor
Archives
Repository of articles and publications dating back to 1997
Ad-free Reading
Uninterrupted reading experience with no advertisements
Seamless Access Across All Devices
Access Business Standard across devices — mobile, tablet, or PC, via web or app
SAVE 25%