Airfare soars even as fuel price falls

Jun 18, 2012, 06:28 IST | Bipin Kumar Singh

On June 15, prices of aviation fuel went down for the 5th time in 2 months, but airlines say they have no plans to bring down the skyrocketing prices of tickets.

You would be right to assume that if domestic airlines increase fares when oil companies raise aviation fuel prices, then similarly when oil companies reduce prices they should pass on the benefit of this reduction in cost to passengers. But, even after five cutbacks in fuel prices in recent months, airlines haven’t on a single occasion made any announcement to reduce fares.

On June 15, Aviation Turbine Fuel (ATF) price was reduced by a substantial 5 per cent, the steepest reduction in rates in 27 months. The last reduction of 5.48 per cent was on February 1, 2010. Two days since the easing of prices, no announcement has been made by any airlines.

Fuel factor: Even after five cutbacks in fuel prices in recent months, airlines haven’t on a single occasion made any announcement to reduce fares. Pic/Sayed Sameer Abedi

Fuel factorEvident anomalies
On March 1 this year, State-owned oil firms increased jet fuel prices by 3.2 per cent, then on March 15 it was further increased by 2 per cent, and on April 1 it was raised by 2.8 per cent, making it a hike of eight per cent in a span of 30 days. Subsequently, airlines increased fares twice in the same period. Domestic airlines have been all along citing two excuses to defend the hikes — one, the increase in fuel prices and two, the busy summer holiday season.

If we look at another set of statistics that details the reduction in the rate of ATF prices, the arbitrary policy of airlines is exposed. State-owned oil firms had on June 1 slashed rates by 2 per cent (Rs 1,376.81 per kl) and Rs 754.3 per kl cut in prices in the three previous fortnights (Apr 16, May 1, May 15). On June 15, the prices were reduced by a massive 5 per cent, and airlines were entitled to the benefits from June 16.

Air Passengers Association of India (APAI), the largest air passenger body, stated that prices should be reduced, as fuel prices have gone down drastically. “I have taken up this matter with the CEOs of all airlines in all forums. As fuel prices have gone down, airfares must come down to provide relief to travellers,” said Sudhakar Reddy, APAI, president.

Fares doubled
“We book thousands of travelers everyday both on domestic and international sectors. What we have seen in the past three months is that fares for metro destinations have doubled. But when oil rates are reduced, fares stay the same until the airlines reduce it,” said Devang Sanghvi of Andheri based Venus holidays.

“As far as Air India is concerned, as of now there are no changes on the airfare front,” said the official spokesperson of Air India. Jet Airways spokesperson said, “There are no changes as of now.” While Spicejet airline spokesperson said, “No announcement has come related to changes in airfare after the five per cent cut in jet fuel prices. If there is any announcement, it will only be on Monday or thereafter.”

The official spokesperson of Indigo airline could not be reached for comment. However, a senior official with the commercials department of the airline confirmed that as of now no changes have been made in the airfare after the reduction. Both Kingfisher airline and Go Air spokespersons refused to comment on the issue. 

The percentage that jet fuel constitutes of an airline’s operating cost

Did you know?
Indian Oil, Hindustan Petroleum and Bharat Petroleum, revise jet fuel price on the 1st and 16th of every month.

Reduction in ATF prices
>> April 16: Rs 169.3 per kilolitre
>> May 1: Rs 312 per kl
>> May 15: Rs 273 per kl
>> June 1: Rs 1,376.81 per kl
>> June 15: Rs 3,260 per kl 

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