Airlines may increase price of tickets with hike in ATF

With the Government affecting a steep over nine percent hike in aviation turbine fuel (ATF), airlines may increase the price of tickets.

PTI| Last Updated: Jun 01, 2016, 22:59 PM IST
Airlines may increase price of tickets with hike in ATF

New Delhi: With the Government affecting a steep over nine percent hike in aviation turbine fuel (ATF), airlines may increase the price of tickets.

"With the price of Aviation Turbine Fuel (ATF) increasing by a steep 9.2 percent, this could result in an increase in airfares as fuel constitutes approximately 40 percent of an airline's operating costs," travel portal Yatra.Com president Sharat Dhall said.

The fuel cost accounts for about 40-50 percent of the operating expenditure for airlines in India.

Flying has already become costlier from today following the introduction of a new tax. Finance Minister Arun Jaitley had in his Budget for 2016-17 proposed a 0.5 percent Krishi Kalyan Cess on all taxable services, which came into effect from today.

In the fourth straight monthly increase in rates on global cues, ATF price in Delhi was hiked by Rs 3,945.47 per kilolitre, or 9.2 percent, to Rs 46,729.48 per kl, from June 1.

The hike came on back of a 1.5 percent increase effected on May 1 and a steep Rs 3,371.55 (8.7 percent) hike on April 1. Prior to that, rates were hiked by steep 12 percent, or Rs 4,174.49, on March 1.

Significantly, India's domestic air traffic market logged the fastest growth in the world for the 13th consecutive month in April. The market grew at nearly 22 percent during the month.

"India's domestic traffic soared 21.8 percent, marking the 20th month of double-digit traffic growth and the 13th consecutive month it has led the domestic markets," global airlines body, International Air Transport Association (IATA) said last month.

The continuous high growth came on the back of lower fuel prices and substantial increase in number of flights operated by the domestic carriers.

"The lower air fuel prices have acted as a stimulus for air traffic growth over the past few months, encouraging people to take flights for their summer holiday travel," Dhall said.

Another travel portal MakeMyTrip, in a study, last month had said that ticket prices were down by around 35 percent on domestic and 16 percent on international routes on a year-on-year basis, resulting in growth in passenger traffic.