TO OFFSET IMPACT OF FUEL PRICE HIKES, AIRLINES MAY RAISE FARES

Airlines are looking to raise fares, cut non-fuel costs and boost non-aero revenue to offset the impact of rising fuel costs and a depreciating rupee.

Indigo, India’s largest airline in terms of passengers carried, was the first to hike fares by levying a fuel surcharge of as much as ₹400 on domestic routes from 30 May to offset higher costs.

The company’s profitability may still come under pressure in the quarters ahead, as it may not be able to fully pass on costs to passengers if fuel prices rise further, brokerage IndiaNivesh said in a 3 May note on InterGlobe Aviation (IndiGo).

Fuel constitutes 35-50% of an airline’s total costs. Airlines in India also make payments in dollars for salaries of expatriates, for maintenance and overhaul, purchase of new aircraft and for buying jet fuel.

However, with India being a price-sensitive market in the commercial aviation segment, airlines often struggle to pass on costs to customers.

A SpiceJet spokesperson said the airline was evaluating whether to pass on rising costs to passengers. “No decision has been taken yet,” the person said.

SpiceJet chairman Ajay Singh had said earlier in May that Indian airlines might have to absorb the impact of rising fuel costs, if prices breach $100 a barrel.

“So far, we have been able to pass on the increase in oil costs to passengers, which the market has taken well as we are currently flying with a load factor exceeding 90% at high yields,” Singh said in an interview.

MUMBAI: