business to business Articles

Airfare prices to go up again

There had been some bad news for the low fare passengers when most airlines had to raise their prices followed by the announcement of hike of crude oil prices. The result was not only airfares getting higher but also cancellation of many low budgets inter city flights. After the hike of prices the flow of traffic was expected to fall and major low budget airlines like SpiceJet, IndiGo and Deccan were left with little options but cancel these flights.

If this was bad news then there is worse news for frequent air travellers, the airfares are going up again next week. The hike of prices is expected to come as a result of the crude oil prices touching almost $142. The airlines are expecting the oil PSU to also raise the aviation turbine fuel or the ATF prices from Monday. And any increase in these costs will have to borne by passengers which will be in the form of higher surcharge and hence the hike of airfares.

Some of the airlines like SpiceJet and IndiGo are thinking of implementing more levels of surcharge. Presently there are two levels of surcharge which are below and above 750 km. This will help to handle the mass departure of passengers on medium and short haul flights to other modes of transportations. As the vacations of most schools are getting over and business travels also declining there is an expected negative travel growth for the industry during the months of July and August. How much these aspects will change during the winters will largely depend on the ATF prices. Another important factor is also the survival of smaller airlines during this period of financial crisis.

The airlines fear that with states not agreeing to the demands of reducing sales taxes on ATF and government not willing to pass the high costs of diesel, petrol and LPG the ATF will have to be increased as per reports from the aviation industry. The SpiceJet executive chairman said that they were planning on three levels of surcharge which would be below 750 km, 750 to 1000 km and the rest above 100 km. With this method at least the medium range fliers will be provided with some relief.

The president of IndiGo airlines, Bruce Ashby, said that airlines have not yet been able to pass this increased rates on to passengers very efficiently. There requirements also have to be acceptable to the market and passengers else they will move to other resorts. The surcharge of the fuel should not be close to actual costs of flying for each flight and they were ready to increase the levels as required.

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