Govt wants fuel surcharge to go, but airlines resist

New Delhi: The government plans to ask local airline companies to remove the fuel surcharge on tickets to bring down air fares by at least a fifth, but carriers are balking at the idea on the ground that they are still to recover fully from the impact of high jet fuel prices earlier this year.
The civil aviation ministry will ask carriers such as Air India, Jet Airways and Kingfisher to withdraw the surcharge — imposed to offset the effect of skyrocketing jet fuel prices until August this year — arguing that aviation fuel prices are now ruling at September 2005 levels.
Even if airlines increase basic fares to maintain a cushion, while eliminating the added charges, the ticket rates on trunk and metro routes should fall by Rs 1,000-Rs 1,500 per ticket, an official in the ministry said.
But airlines, especially full-service ones, do not see eye-to-eye with the government on this issue. “The sharp and continuous spike in aviation turbine fuel prices earlier in the year left a lasting impact on the bottomlines of airline companies, leading to an accumulation of huge outstanding and liabilities with oil companies. Keeping in mind the cash flow needs to settle these accumulated liabilities, there is no case for a reduction in fares,” a Kingfisher Airlines representative said on Monday.
The airline has promised to “immediately and significantly reduce the fares” after the government classifies jet fuel as a declared good and taxes it at a uniform rate of 4% across the country. The rate on jet fuel currently varies between 4% and 24%.
After a series of cuts in recent months, jet fuel prices have fallen to Rs 32,691.28 per thousand litre in Delhi from Rs 71,028.26 in August this year. Airlines started levying fuel surcharges in 2006. Jet Airways, for instance, levies a surcharge of Rs 1,950 for short-duration and Rs 2,700 for long-haul flights.
23/12/08 Nirbhay Kumar/Economic Times

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Categories: Indian Aviation- In General Dec 2008