Airfare set to increase by upto 15 percent due to aviation fuel price hike? SpiceJet CMD hints

The sharp increase in aviation turbine fuel (ATF) prices, combined with the rupee's depreciation, has forced domestic airlines to immediately raise airfares, according to Ajay Singh, Chairman and Managing Director SpiceJet, on Thursday. Singh stated in a statement that an increase in air fares of at least 10-15% is required to ensure that the cost of operations is better sustained.

The ministry had imposed lower and upper limits on domestic airfares based on flight duration when services were resumed on May 25, 2020, after a pandemic-forced two-month lockdown. For example, airlines currently cannot charge a passenger less than Rs 2,900 (excluding GST) and more than Rs 8,800 (excluding GST) on flights with a duration of less than 40 minutes.

The lower caps were imposed to help the airlines tide over financial loss suffered due to travel restrictions. The upper caps were imposed so that passengers are not charged huge amounts when the demand for seats is high.

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The fuel prices have been rising since the Russia-Ukraine war broke out on February 24. In his statement on Thursday, Singh said that the ATF prices have increased by more than 120 per cent since June 2021.

"This massive increase is not sustainable and governments, central and state, need to take urgent action to reduce taxes on ATF that are amongst the highest in the world," he said.
In the last few months, SpiceJet has tried to absorb as much burden of this fuel price rise, which constitutes more than 50 per cent of our operational cost as we could, he said.

"The weakening of the Indian rupee against the US dollar further significantly impacts airlines as our substantial cost is either dollar-denominated or pegged to the dollar," he added. 

With inputs from PTI