Aviation fuel prices increased by 7%

The country's oil marketing companies have raised prices of aviation turbine fuel by as much as 7 per cent, negating the reduction in prices on June 5 after the government cut Customs duty on the fuel from 10 per cent to 5 per cent.

The airline industry remained largely undecided on the exact quantum of increase in fares following the hike in ATF prices. Industry sources, however, said the prices might increase by Rs 150 for short haul routes and Rs 300 for long haul routes.

ATF prices have been raised by 7.04 per cent in Kolkata, while prices in Delhi, Mumbai and Chennai have gone up by around 4.35 per cent. On June 5, prices of the fuel were reduced by around 4.33 per cent.

"It is not necessary that every price increase in ATF will result in an increase in basic fares or surcharges. We will monitor the situation and take necessary steps. However, there is no decision as of now," said an Air India executive.

While most other airlines were not available for comment, IndiGo and Jet Airways said a decision on increase in fares was yet to be taken. Travel portals said they had no information of any fare rise from the airlines, and it was likely that the carriers would take a breather before increasing prices significantly.

"If the ATF prices have just gone back to the June 1 prices, airlines might take a breather before any significant increase. Also, the airline loads have gone down more than their revenues have increased because of the price rise. With the load factor going down by 20-30 per cent over the last three weeks, even a Rs 10 rise in prices would affect demand. That said, the gap between airline costs and revenues still remains huge even after the constant increase in prices," said Keyur Joshi of travel portal Makemytrip.com.

Last month's increase initially led to carriers like Kingfisher and Air India hiking their fuel surcharge by Rs 300 to Rs 500 for short and long sectors, respectively.

This was followed by another round of increase in fares on June 19, when low-cost carriers like Spice Jet hiked fuel surcharges in a similar manner and full-service carriers like Jet Airways and Air India increased their minimum basic fare to Rs 1,000, Rs 2,250 and Rs 3,000, respectively.