Air India hikes domestic fares up to 25%

Air India had the third highest domestic market share in July at 19.2 percent.

New Delhi: Air India Thursday hiked passenger fares 23-25 percent on all domestic routes following A sharp increase in the price of air turbine fuel (ATF). It may also raise fares on international routes.

"We have hiked fares by 23-25 percent on all domestic routes. This has been done to off-set the recent increase in ATF price," an Air India official said.

The rupee depreciation is also big concern for the airline, said the official, as it has affected the margins of its international operations.

"Going forward, there might be an upward revision in fares for international routes," the official said.

Currently, on domestic routes, Air India has a passenger load factor of 82 percent.

The official said the company was optimistic that it would maintain its market share despite the fare increase and that pre-booking by passengers had ensured a high load factor during the festive season.

Air India had the third highest domestic market share in July at 19.2 percent.

On Wednesday, Jet Airways raised fares by up to 25 percent. Budget carrier SpiceJet earlier increased fares by 25 percent.

The hikes come after the three state-owned oil marketing companies, which revise jet fuel prices on the first day of every month, hiked fuel prices by 6.9 percent for purchases from Sep 1.

This was the fourth hike since June due to the fall in rupee value.

"There are multiple factors at play in this significant increase in air fares, ranging between 15-25 percent, across sectors," said Sharat Dhall, president,

"The effect of the depreciating rupee, the hike in the aviation turbine fuel prices, significant pre-bookings via promotions, have all led to a sudden rise in air fares this time," said Dhall.

Fuel prices comprise about 50 percent of the operating costs of airlines in India and have dented the sector as major airlines bleed under the high state sales tax regime.

Currently, ATF sold in the country is nearly 50-60 percent costlier than in overseas markets like Bangkok, Singapore or Dubai.

There has been a longstanding perception that ATF, which is a super-refined form of kerosene, should not be subsidised for air travel.

The government currently subsidises sensitive products like diesel, LPG (liquefied petroleum gas) cylinders and kerosene.

The high fuel cost and weak economic environment also led SpiceJet in reporting a 10 percent fall in net profit in the first quarter of this fiscal, which stood at Rs.50.55 crore, down from Rs.62.44 crore in the corresponding quarter of 2012-13.

Jet Airways reported a net loss of Rs.355.38 crore in the first quarter of the current fiscal, from a net profit of Rs.24.70 crore in the same period of 2012-13.