Air fares are set to go up by 10-15%; there's a costly reason

By Team Newsable | First Published Jun 16, 2022, 11:24 AM IST

Aviation turbine fuel rates in India are now the highest in the world.

The sharp increase in aviation turbine fuel (ATF) prices and the depreciation of the rupee will soon force domestic airlines to raise airfares.

Ajay Singh, Chairman and Managing Director, SpiceJet, said on Thursday that domestic airlines with no choice but to immediately raise airfares by a minimum of 10-15 per cent to ensure that cost of operations is better sustained.

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There has been a 120 per cent increase in aviation turbine fuel prices since June 2021. Terming this massive spike as unsustainable, the SpiceJet CMD said that central and state governments need to take immediate remedial measures and reduce taxes on ATF.

To note, ATF rates in India are the highest in the world. Oil Marketing Companies (OMCs) have regularly been increasing the ATF prices while keeping on hold the revision in petrol and diesel prices. Also, higher Value Added Tax and duties are levied by the government on aviation fuel.

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To put things in perspective about how much the domestic airlines are getting impacted, ATF prices were hiked by 16.3 per cent on Thursday following which the fuel cost had reached an all-time high of Rs 1.41 lakh per kilolitre in New Delhi.

Hinting that the decision on airfare revision may be around the corner, Singh said that his airline tried to absorb as much of the burden of this hike in fuel prices in the last few months. He further said that ATF expenditure constitutes over 50 per cent of the airline's operational cost

"The weakening of the Indian rupee against the US dollar further significantly impacts airlines as our substantial cost is either dollar-denominated or pegged to the dollar," he said.

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