Airfares may rise further on steep fuel prices

New Delhi: Bulk of air passengers travelling by full-service carriers (about 52%) has seen a stiff hike of up to 40% in airfares in the last six months. This is set to rise yet again, even as budget carrier Air Deccan now plans to graduate into a full-fare airline closing cheap options to consumers. If the trend continues, it could be back to old times again when air travel was restricted only to the moneyed.
"Another 20-30% hike in airfare would be required to offset losses, but it would not happen immediately. Next round of hike would depend on the kind of rise in jet fuel prices. Increased airfare would certainly hit growth. In the next few months the growth in air traffic could be even zero," Jet Airways CEO Wolfgang Prock-Schauer told ET .
"While passing on the burden to consumers is an option to recover losses, it can also be managed by lowering capacity. The industry currently has an overcapacity of about 20%," he added.
While there has been a sharp increase in airfares in the last one month, it remained pretty much stagnant in the last two years. In the last three months, rising airfares have spoiled the party for air travellers. For instance, airfare for the busy Delhi-Mumbai route has increased by about 25%.
The country’s largest airline by marketshare, Jet Airways, last week increased its base fares for up to 750 km by Rs 1000, between 750 km and 1000 km by Rs 2,250 and beyond 1000 km by Rs 3,000. Other carriers, including Air India and Air Deccan, also followed suit.
As airfare hike has been almost a monthly exercise by airlines on account of the high fuel prices, air travel could again become the prerogative of the elite class. “I wouldn’t say that it’s now for the elite, but, yes, we are surely back to the pre-Deccan days. If ATF prices further increase, we will hike the fuel surcharge since there is no way the airline can absorb the increase,” says SpiceJet V-P (marketing and planning) Kamal Hingorani.
23/06/08 Nirbhay Kumar & Vishakha Talreja/Economic Times

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Categories: Indian Aviation- In General Jun 2008