Air Traffic Growth Dips on Higher Fare, Fuel Cost
Posted on: Friday, 16 May 2008, 00:00 CDT
By Saurabh Sinha
NEW DELHI: Increasing cost of flying in past few months is now leading to a slowdown in the aviation industry. For the first time in nearly three years, growth has slipped to single digit. According to government figures, April 2008 saw only 8.65% growth in passenger traffic over the same month last year.
In January-March 2008, passenger traffic grew 11.12%, compared to the same period last year. The real slide began after this period as fuel surcharge from last December to this March rose to Rs 1,650. Thanks to crude touching record high, airlines introduced the concept of differential surcharge - Rs 1,800 for short and Rs 2,000 for medium-haul flights - in April.
With this, the taxes and surcharge component of each airline ticket became between Rs 2,175 and Rs 2,325. Mounting losses forced most airlines to levy higher basic fares, leading to loss of passengers. Surcharge went up again in May.
Airlines are a worried lot as they have unfilled planes flying across the country. Since overall fares are high, the demand is not matching the supply. The growth in traffic in 2007 over 2006 was 32.51%. "If states don't reduce sales tax on jet fuel and ticket prices fall, growth is going to slow down even further than the single digit recorded in April," said a senior official of a full service airline.
"It is difficult for us to hike basic fares as some low-cost carriers are offering this fare at levels of zero, Rs 3 or Rs 99. If this situation continues, future growth of capacity will be difficult and growth along with connectivity will suffer," he added.
LCCs (low-cost carriers), that are offering low fares, are also complaining.
"Our advance bookings have suffered badly as people feel tickets rates are very high. A proportion of family bookings, at least, are on hold as wannabe fliers are waiting for fuel surcharge to fall," said an LCC official.
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Source: The Times of India
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