Saturday, May 27, 2017

Too good to be true: Why those Rs12 air fares are only a flight of fantasy

Come June, the lean season for the airline industry takes off. The country’s largest carriers have begun to roll out their discounted ticket schemes, some announcing base fares as low as Rs11. But if these fares sound too good to be true, it’s because they are.

The actual ticket price depends on the fuel surcharge collected by the airline and the taxes collected on behalf of the government. However, airlines are not transparent about how they determine the fuel surcharge. As a result, a ticket with a base fare of Rs11 orRs12 could finally cost much more.

For example, SpiceJet currently has a five-day fare discount scheme to celebrate the airline’s 12th anniversary. It promises low base fares starting at Rs 12 on some sectors; the offer ends on midnight, May 28. Indigo has a six-day special sale, from May 23 till May 28, with a base fare of Rs11.

However, a Mumbai-Delhi one-way ticket for July 17, on Makemytrip, costs Rs2,183 on both airlines.

On SpiceJet’s Rs12 base fare, it adds on Rs2,171 as fees and surcharge. Indigo’s base fare is Rs312, but it comes with an additional Rs1,871 levey as fees and surcharge.

So why does the fuel surcharge differ on the same route? No one in the airline industry wants to talk about it.

Kapil Kaul, CEO (India and Middle East), CAPA India, an aviation advisory firm, said, “While the taxes are fixed, the fuel surcharge component is the airline’s prerogative. Ideally, this should be distance-based. The surcharge was introduced when crude oil prices were between $90-110 a barrel. With Brent Crude now at around $55, the surcharge does not seem logical.”

A Spicejet spokersperson said the airline has the “prerogative to fix the fuel surcharge, which may vary from flight to flight. By giving out a break-up of the base fare, fuel surcharge and taxes, SpiceJet is not only being transparent but is also... educating the customer on various charges that constitute his final ticket price.” A spokesperson for IndiGo said, “Our fares include base fare, fuel charge and the CUTE charge (applicable in few stations only). In our discounted (base) fares, the fuel surcharge remains the same as that of regular fares.”

Notably, discounted tariffs are available only on a limited number of seats, and those numbers are never disclosed.
27/05/17 Tanya Thomas/Business Line