State-run Air India said it will raise fuel surcharge on tickets from June 19, following similar moves by other carriers.
“We are increasing the fuel surcharge by Rs 400 effective tomorrow (Friday),” its spokesman said on Thursday, adding the higher fares were for both long and short haul routes on the domestic sector.
Earlier in the day, low-cost carrier SpiceJet Ltd raised its fuel surcharge on tickets by 400 rupees following a rise in jet fuel prices, a senior official said.
Jet Airways on Wednesday said that it has raised the fuel surcharge on tickets by 400 rupees across all domestic sectors effective June 17.
The move comes a day after state-run oil firms raised jet fuel prices by over 12 per cent from June 16, according to the website of Indian Oil Corp.’s, the country’s biggest refiner.
Striving to become a ‘green airline’, Air India today said it has made savings of over Rs 46 crore in six months till this February by implementing several measures to enhance fuel efficiency.
Quoting experts of the International Air Transport Association (IATA), who carried out its fuel efficiency audits, the national carrier said the total fuel savings projected for the year with “revised processes” were over 4.56 crore kilolitres of fuel.
The rise in fuel prices will offset gains for Indian carriers, who are offering discounts to lure hesitant customers ahead of the vacation season, and even force them to hike fares, industry officials say.
Almost all airlines have offered discounts on advance day bookings in a bid to compete with with train fares, and are rapidly expanding their network in tier-2 and tier-3 cities.
But a recent hike in prices of aviation turbine fuel (ATF), which makes up around 40 percent of an airline’s operating costs, may put the brakes on near-term relief.
If you are itching to see the change of Guard at Buckingham Palace in London, climbing to the top of the Eiffel Tower in Paris or going with your wife to visit cousins in Dubai, then there is no better time than now.
A combination of declining corporate travel and southward movement in global prices of aviation turbine fuel – with crude oil prices falling from $140 a barrel to around $50 now – is seeing the market get flooded with rock-bottom basic airfares.
For instance, Air India is offering a return ticket between Mumbai and New York at about Rs 45,000 now — down from Rs 70,000 earlier. Between Hyderabad and Dubai, Emirates Airlines has a ‘buy-one-get-one-free’ offer for Rs 30,000.
Then, Abu Dhabi-based Etihad Airways is offering a basic return fare of Rs 6,490 between Mumbai and London, or you can fly with Air India on the same sector for Rs 6,900. But before reaching for your wallet, remember that the final fare on Etihad will be around Rs 22,500 while a seat on the Maharaja will cost you Rs 2,400 more. Likewise, Thai Airways is offering a basic fare of Rs 23,935 which eventually comes to about Rs 41,000 along with taxes on the Mumbai-Australia route.
Forthcoming polls are set to play saviour to the private aviation sector, reeling under the impact of global meltdown, with the
industry being flooded with demands to rent out helicopters by the political parties to fly their campaigners to far-flung areas.
Although campaigning for the forthcoming parliamentary election is yet to pick up, the private aviation companies are working overtime to live up to the demand from the political parties.
“The private aviation industry was facing the heat of global meltdown and registered at least a 25 per cent slump in the business… But on expected lines, the business is picking up fast on account of the poll season,” Managing Director of Dhillon Aviation Private Ltd Ajay Veer Singh, told reporters here.
Petroleum Minister Murli Deora today said private airlines Jet Airways and Kingfisher owe Rs 800 crore to the three oil PSUs, Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum on purchase of jet fuel.
“Just yesterday, I was told by (Union Civil Aviation Minister) Praful Patel that Rs 800 crore is still to be given by them (private airlines),” Deora told reporters here.
He was replying to a question on the amount of losses oil marketing companies (OMCs) incurred due to delayed payments on purchase of Aviation Turbine Fuel (ATF).
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With global oil prices hovering steadily around $40 a barrel for the past several weeks, public sector oil companies have reduced prices of jet fuel for the second time in a fortnight and the eleventh time since September to bring it to the levels prevailing in 2005.
Effective from Saturday night, public sector oil companies reduced the jet fuel prices by a further 7 per cent or approximately Rs2,125 per kilolitre, making the fuel available at Rs27,106 per kilolitre.
Since yesterday, jet fuel price went down Rs2,052 per kilolitre to Rs.27,106 in Delhi, in Mumbai, where over 50 airlines, both international and domestic airlines operate and approximately 700 landings and take-offs take place everyday, the jet fuel prices has come down from Rs29,985 per kilolitre to Rs27,861 per kilolitre while in Kolkata the reduced price is still high at Rs34,847 and Chennai, Rs30,317 per kilolitre.
It’s been a good new year for air travellers. As aviation turbine fuel (ATF) prices fell sharply last year, most airlines
reduced their
fares during the new year. But Kingfisher’s yet to come up with a fare cut announcement.
In fact, Kingfisher’s delay in announcing the percentage of fare cut has benefited Jet Airways. Passengers have quickly moved over to Jet, and have started bookings tickets on sectors where both airlines have flights. It’s not yet known why the delay in announcing the cuts but an industry source said there were some miscalculations between Jet and Kingfisher alliance on the fare cut decision.
It was learnt that Jet-Kingfisher alliance had agreed to similar amount of fare cuts to be implemented on the same day. But now, Kingfisher is considering both basic fare and fuel surcharge cuts of around Rs 600 and Rs 400, respectively, which would be implemented next week, the industry source added.
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State-owned oil marketing companies today cut the prices of aviation turbine fuel (ATF) or jet fuel by a further 6.8 per cent, making the eighth straight reduction since September.
With the latest cut, jet fuel in Delhi will cost Rs2,234.07 less at Rs30,457.21 per kilolitre effective midnight tonight, sources at Indian Oil Corporation, the nation’s largest fuel retailer, said.
Jet fuel prices, which make up half of airlines’ operating costs, have steadily fallen and is currently around 45 per cent of their all-time high level of Rs71,028.26 (Delhi) in August, and are at its July 2005 levels.
In Mumbai, ATF will cost Rs31,378.78 per kl from tomorrow against Rs33,719.47 per kl at present.
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Turning a deaf ear to aviation minister Praful Patel’s plea to cut airfares as jet fuel prices have crashed by almost half in past
three months, Vijay Mallya-owned Kingfisher on Monday ruled out any such move for now.
The airline reiterated its old condition that fares would be dropped as and when the government notifies aviation turbine fuel (ATF) as a declared good so that it attracts a uniform 4% sales tax across the country.
To amicably resolve the contentious issue of unpaid jet fuel bills of the public sector oil retailing companies by domestic airlines, the Ministers of Petroleum and Civil Aviation have called for a meeting of the industry and officials here on Wednesday.
Indications are that the Petroleum Minister, Mr Murli Deora, and the Civil Aviation Minister, Mr Praful Patel, have been asked by the Prime Minister, Dr Manmohan Singh, to sort out the issue at the earliest.
Mr Deora told newspersons here on the sidelines of an auto event, “We want to help these airlines and so I have called a meeting to explore all the options.” The Finance Ministry representatives are also expected to attend the meeting. Sources told Business Line that the options which could be considered include extending of the current grace period given to domestic airlines to pay their fuel bills and a possible restructuring in the aviation turbine fuel (ATF) duty structure, which is essentially in the domain of the Finance Ministry.
While the PSU retailers have brought down the base price of ATF by almost 20 per cent in the last two months, the airlines still end up paying a higher price. This is since over the base price is added customs duty of five per cent, excise duty at the rate of eight per cent, three per cent education cess and sales tax at an average of 25 per cent. Highest sales tax component on ATF is in Maharashtra.
The financially weaker airlines of the Indian aviation industry unable to cope with tough market conditions will go under, possibly leading to government intervention to prevent the creation of a monopolistic situation, a senior official at consultancy firm Ernst & Young said.
Indian airline companies have been hit hard by the rising cost of jet fuel, which has resulted in slower growth in passenger and cargo traffic. Air-traffic growth slowed to single digits (5.1%) for the first time in five years during April-June 2008, according to E&Y’s latest report on the Indian aviation sector.
E&Y’s ‘The tough will get going’ report says aviation turbine fuel (ATF) accounts for nearly half of operating costs for airlines in the country, the highest in Asia.
During April-August 2008, ATF prices in India’s four metros shot up by more than two-thirds year-on-year, compared to a rise of about 6% for corresponding period in 2007.
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India’s aviation industry has just a 2% share in the $470-billion global industry, but accounts for a third of its total losses. Blame the fuel cost volatility and high capital expenditure.
If the market turbulence lasts longer, domestic carriers may not be able to sustain their business unless major structural changes are carried out. Interest and fuel costs need to stabilize. This will allow carriers to adjust fares and thereby keep demand stable for a long period.
In a falling economy, the aviation industry would normally be one of the early birds to hit the air pocket. The reason is intense competition from other transportation modes and the growing ICT infrastructure that can somewhat obviate travel.
Aviation service provider Air India has chalked out a major initiative to increase its operational efficiency to overcome the “alarming situation” arising out of the unprecedented increase in the price of fuel in recent months.
Air India had recently invited the international airport transport association’s green team to undertake a fuel efficiency gap analysis (FEGA) of the airline’s operations, related to emissions reduction and fuel efficiency, where it was predicted to have potential to save USD 198 million per year for the airline, if certain changes were introduced.
Get ready to fly out of the air pocket. The government is drawing up a whopping bailout package - to the tune of Rs 4,500 crore to Rs 5,000 crore - for all domestic carriers. Coming close on the heels of steepest ever cut in aviation turbine fuel (ATF) prices by over 16%, the relief package is expected to come as a big shot in the arm for the struggling aviation industry.
According to top government sources, the bailout package is expected to give a relief of Rs 4,500-5 ,000 crore to all domestic carriers in the coming months.
Once these measures are rolledout , it is likely to turn into celebration time for consumers too, since many leading domestic airlines , including national carrier Indian, would be forced to re-work their fares.
According to sources, the salient features of this package would be to cut airport charges for a limited period by 50%. It is estimated that all airlines together deposit Rs 2,500-3 ,000 cr annually as airport charges, and this step will come as a huge relief for the ailing carriers. The through-put charges which the airport operator charges from the oil companies would also be reduced drastically. In the last one year, these charges have shot up to Rs 1,000 per kilolitre (ATF) from Rs 60 per kilolitre. Besides, the 8% excise duty on ATF would be removed and all oil companies would be asked to rationalise the base price and bring it at par with the international ATF prices.
The increase in airfares on most routes across the country has been much sharper than the rise in fuel costs for airlines in the past four months.
Aviation turbine fuel (ATF) prices increased by 34 per cent whereas fares - on an average across the country - shot up by more than 65 per cent. Since fuel accounts for about 45 per cent of the total costs, the actual impact on airlines, in terms of increase in the cost of operation, would have been around 15 per cent. Airlines also cut capacity by 20 per cent during the period.
IndianOil Skytanking (IOSL), a consortium of Indian Oil Corporation, Indian Oiltanking and Germany’s Skytanking, is eyeing Delhi, Mumbai airport modernisation projects for expansion of aviation fuel storage systems.
The company, which has successfully commissioned the ‘open access’ fuel storage system for the first time in the country at Bangalore International Airport, has submitted its expression of interest (EoI) for the projects.
Currently, IOC, HPCL and BPCL are providing fuel storage services at Mumbai and Delhi airports.
According to R Ravi Kumar, CEO, IOSL, the company is the first fuel farm operator in the country to carry out single-man refuelling at any airport.
Aviation Turbine Fuel prices plunged 3.50 per cent at Rs 6,610 per barrel in the domestic futures market on Friday even as crude rose marginally in global markets.
ATF is a special type of petroleum product, used in airlines.
Aviation Turbine Fuel (ATF) for the far-month August contract tumbled by 3.50 per cent to Rs 6,610 per barrel with a business volume of one bbl.
However, near-month July contract traded a shade higher by 0.27 per cent to Rs 6,585 per barrel after rising to Rs 6,605 per barrel, clocking a business volume of 79 bbls.
In a setback to airlines which are struggling to survive, the finance ministry has said it would neither notify aviation turbine fuel (ATF) as ‘declared good’ nor compensate states partly if they cut sales tax on jet fuel. The empowered committee of state finance ministers had earlier said states could consider reduction in sales tax on ATF only if the Centre shares burden of revenue foregone and airlines passed on the benefit to passengers.
There was no possibility of either ATF being notified as a ‘declared goods’ or the Centre compensating states for revenue foregone, finance secretary D Subbarao said. “We don’t think there is case for subsidising air travel in the country by sharing revenue burden if states bring down sales tax on ATF,” he had told ET recently.
The ‘declared goods’ status means jet fuel would attract a uniform sales tax of 4%.
