ATF price hike upsets airlines

Some try to hold on, some think of fares hikes as fuel prices start rising again

BY A CORRESPONDENT

The rise in ATF prices have come as a dampener to many airlines who were hoping to reduce the fuel surcharge in January. Recently, ATF prices had come down by 10%, following which SpiceJet reduced the fuel surcharge. Other airlines' hopes of following up with fare cuts this month seems to be dashed with the price going up by 7% again.

Fuel price is the major component of air fares. Even a slight increase or decrease in ATF prices can disturb the profitability of airlines. For this reason, airfares are inextricably linked to ATF prices.

Now, airlines are watching rising ATF prices with concern. Kingfisher Airlines CEO Nigel Harwood was quotes as saying in DNA newspaper: “There is no immediate plan to revise our ticket prices.”

The Reserve Bank of India recently gave permission to both Jet Airways and Air India to hedge fuel prices. Air India is already on with it, but jet will take some more time.

In India, ATF prices constitute about 30% of total airfare, which is higher than the global average. For low-cost airlines and domestic flights, the ATF component of fare is always high, whereas for international flights and legacy carriers, the component is smaller.