June 20, 2008

Airlines Plan 20-25% Fare Hike

By Saurabh Sinha

NEW DELHI: Your hopes of flying becoming cheaper anytime soon have just been dashed. Indian carriers have told the aviation ministry that they need to hike fares by 20 to 25% (Rs 2,000 on an average) to cover their operational costs, considering the current high price of aviation turbine fuel (ATF) or jet fuel.

The airlines further said that even if states lower sales tax on jet fuel, they will not be able to pass on the benefit to passengers by lowering surcharge. Even incrase in fare could be higher than 20- 25% and surcharge may exceed the current highest slab of Rs 2,900, if ATF prices go up again next month, with crude hitting $140 again.

Aviation secretary Ashok Chawla had asked airlines during a meeting earlier this month to do some calculations and inform the ministry if they could pass on the benefit of lower sales tax to passengers. Any such assurance would have made the ministry's task of getting states to lower tax on ATF easier. But airlines - who are feared to post a collective loss of Rs 8,000 crore in fiscal 2008- 09 with national carrier Air India leading the pack - said they are not in a position to do so.

This is not the only issue that threatens to make flying more expensive. On Monday, the GMR-backed Hyderabad International Airport (P) Ltd (HIAL) sent its proposal for charging user development fees (UDF) from domestic passengers to the ministry. The infrastructure major has proposed a levy of Rs 600 for all outbound passengers flying to anywhere out of Andhra Pradesh. For those flying within the state, a fee of Rs 350 has been proposed. The government is "looking at" these rates and is likely to ask the developer to lower the same as the overall high cost of flying has now brought domestic traffic growth down to single digit.

A senior GMR official said: "The new airport started functioning on March 23 and we decided not to charge any UDF for first three months. The original plan was to have a UDF of Rs 750 for all outbound domestic passengers and this amount has been lowered substantially now. The huge investment made on developing airport has to be recovered and UDF is a component for doing that."

Bangalore airport is also going to levy a UDF on domestic passengers when it completes there months of operation. Airlines fear that the new airport in Bangalore and Hyderabad are far away from the city, something that has already led to decline in flights at Bangalore. So flying out from these cities could soon get even more expensive.

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