Airlines chary of fare hikes despite costlier ATF

Bangalore/Mumbai: The last one-and-a-half months have seen three hikes in aviation turbine fuel (ATF) prices, adding up to 18%. But airlines haven't hiked their fares.
The reason, says a senior executive of IndiGo, is the smooth yield zone that carriers have flown into. Subdued demand for air travel is also keeping them from tinkering with fares.
Airlines fear any move to raise fares will only further pull down the number of domestic flyers that has already slumped 15% in March over the same month last year.
A Mumbai-based analyst, who did not want to named, too said it would make better business sense for airlines to hold their current fare levels, given current market conditions. He said the situation is not so bad for airlines in absolute terms, but any hike in fares could lead to problems.
He added that airlines feel fare hikes or cuts have a sentimental impact on travel in India.
GoAir was offering 50-70% discounted fares on sectors such as Bangalore-Ahmedabad and Mumbai-Bangalore, which has put pressure on other carriers and is not allowing them to raise fares.
M Thiagarajan, managing director of Paramount Airways, said airlines cannot keep operating on constant revenue when the costs are shooting up. He says airlines will have to consider tweaking fares if the upward trend in ATF prices persists.
Ankur Bhatia, managing director of Amadeus, which provides ticketing IT solutions for airlines, said that the aviation industry is still plagued by supply overhang, which has intensified competition.
17/04/09 Praveena Sharma & Archana Shukla/Daily News & Analysis

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Categories: Indian Aviation- In General Apr 2009