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Airline fares on fire as jet fuel prices head north

Jet Airways has been first off the blocks to charge a Rs 3,250 additional fuel surcharge per ticket on its Gulf routes while Emirates and Kenya Airways have increased fares in all classes on India-Gulf routes by 10-15 per cent.

Rising jet fuel prices are forcing commercial airlines to increase fares. Jet Airways has been first off the blocks to charge a $50 (Rs 3,250) additional fuel surcharge per ticket on its Gulf routes while Emirates and Kenya Airways have increased fares in all classes on India-Gulf routes by 10-15 per cent.

Cathay Pacific has increased fuel surcharge by up to $5 per ticket . Other airlines like SpiceJet and GoAir are reported to be contemplating a similar move for domestic and overseas destinations.

Jet fuel prices were hiked by 6.9 per cent to Rs 75,031 per kilolitre (1,000 litres) with effect from September 1. This is the fourth consecutive monthly hike in aviation turbine fuel prices, which have now gone up by over 20 per cent since June.

Oil companies increased jet fuel prices by 6.3 per cent to Rs 70,203.15 per kilolitre on August 1 due to rising crude oil prices and a sharply depreciating rupee, which had further increased import cost. The increase came on the back of a 5.8-per cent increase in jet fuel rates on July 1 to Rs 66,033.75 per kilolitre from Rs 62,416.16 on June 1.

GoAir chief executive officer Giorgio De Roni said last week that an increase in airfares "is inevitable" in order to meet high operating costs. Jet fuel now accounts for close to 40 per cent of operational costs of commercial airlines.

Domestic airlines have not revised fares due to decreasing passenger traffic since the beginning of July. In fact, fares are about 20 per cent lower year-on-year despite rising costs.

However, airlines are expected to raise fares as jet fuel prices are moving north.

Last week, Jet began levying a $50 additional surcharge on higher-level economy class fares for its flights to Dubai, Doha, Kuwait and other Gulf destinations to cash in on Eid holidays.

While a one-way Delhi-Dubai or Mumbai-Dubai average fare is around Rs 9,000-Rs 10,000, higher-level economy class seats are available now at around Rs 12,000-Rs 15,000.

Tickets to Doha and Kuwait are not available for the next few days.

Rajinder Rai, member, advisory board, Travel Agents Association of India, said, "Any increase in airfare is directly linked to increase in demand. Airlines will keep increasing fares as long as they can compete with their rivals."

According to sources, the government is also contemplating a hike in passenger service fees (PSF) charged on every domestic ticket. The levy, used to fund the cost of providing security at airports, has not been increased since 2002.

The move to increase PSF has been initiated as the collection of funds on this count has fallen well short of the cost of providing security at airports. The annual expenditure in providing security at airports was around Rs 1,200 crore while the sum collected through PSF was estimated at about Rs 400 crore less than the spending on security.

In association with Mail Today