Jet cashes in on festival rush, hikes fares by 10%; others to follow suit

Despite festive season ahead and ATF prices expected to drop by a further 10% in October, Jet Airways announces to hike fares by up to 10% for all flights from October 1.

The carriers, however, do not expect the fare rise to impact traffic growth as October 1 also signals the start of the festive season, which is considered the peak season for airlines in India.

The falling rupee and rising costs coupled with cumulative losses expected to touch Rs 2,000 crore due to seven odd months of volatile fuel prices has led to Jet Airways and the other full service carriers to hike fares.

While sources said the national carrier Air India is hoping to raise fares by around 20%, the carrier is yet to decide.

?We will decide on the quantum of hike on September 30 after the oil companies intimate us on the change in ATF prices,? Air India spokesperson said.

Any hike in fares, if implemented by Jet airways, will be followed with hikes by the other full service carriers, an official from national carrier Air India said. ?It is not that there is because of cartelisation but due to the highly competitive sector that has forced all airlines to wait for someone to be brave enough to hike fares before hiking fares,? the official said.

When asked, Kingfisher officials who did not want to be named said they would obviously raise fares for the festive season. The quantum of the hike will depend on how much the competition raises their fares.

India’s state-owned oil marketing companies are expected to cut jet fuel prices by a more than 10% in October after global crude prices fell to below $100 a barrel.

Oil companies have reduced the prices of jet fuel (known as aviation turbine fuel, or ATF) for domesitc airlines by 16%.

ATF accounts for about 45% of operating costs of airlines and therefore any movement in its price has a major impact on the airlines balance sheets.

ATF prices in India are based on international import parity prices.

The huge jump in ATF costs over the past five months has led to massive cost cutting and some desperate measures being implemented by all the airlines.

Air India had budgeted around Rs 6,500 crore for fuel in March for the fiscal year 2008-09 at the time of making its budget. But due to the jump in ATF over the past month, the carrier has ended up paying Rs 1,500 crore above that already, Raghu Menon, chairman and managing director of the national carrier said.