Food And Travel

Travellers Buckle Up! Airlines Are Likely To Raise Fares By 13% Due To Increased Fuel Prices

AASTHA SINGAL | 0
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| January 5 , 2018 , 15:47 IST

The air travellers of the nation should get ready to pay more for hiked fares. The increasing fuel prices and cost of operations due to the Goods and Services Tax are likely to affect the airfares by 13 percent, suggests an Economic Times report.

Notably, ever since the implementation of GST, cost of operations for carriers have reached up to 27 percent whereas the Jet fuel is yet to be added to the Tax's purview. The low fares and capacity added by the airlines have earlier helped in the fast growth of India's aviation market.

Speaking to Economic Times, SpiceJet chairman Ajay Singh expressed, " There is a very high degree of pent-up demand. I think fares will probably go up. Cost is going up as fuel is going up and GST has added to cost."

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The airlines will likely recover the increased cost of operation through hiked fares. " The government should look at bringing jet fuel under GST, too, and provide us input tax for it. We need to look at airport costs, too," said a senior executive of a legacy carrier.

While the jet fuel prices have risen by 16 percent whereas the operational costs have gone up by 7 percent. Another executive said, " I do see fares increasing at half the rate of cost increase up to a limit. The increase in fares will be more in last-minute fares and advance purchase fares will remain cheap."

The aviation fuel marks a huge portion of airline's expenditure, prices for which have been increased since August. Indigo stats presented at the end of September suggested that the fuel spending has accounted for 35 percent of its operating expenses in the three months.

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Airlines have admitted that the newly introduced GST might add a burden of Rs 4,750 crore per annum on them and 'potentially wipe off the profits earned by airlines.' The travel industry officials claimed that the demand for air transportation will remain strong this year and the increased fare will only be applicable post-March.

" Fares need to increase as cost of operations has increased but the higher fares may not be felt so much till March as it's a non-peak quarter for airlines now. The increase will happen after March when the peak season travel starts," said a senior executive of the low-cost carrier.

"I do not see any major increase in fares at present levels of fuel price. We expect demand in 2018 to remain robust and capacity being added by airlines will be able to take care of the demand. However, things would change if fuel prices increase further from here," said Sharat Dhall, COO at Yatra.com, an online travel portal.