Higher fuel costs in India force airlines to raise fares
Air passenger traffic growth slowed to 17% year-on-year in May, the slowest annual increase reported in May in the last four years
The rise in fuel prices is taking a toll on India’s fast-growing domestic aviation sector, with airlines forced to increase fares during the holiday season.
Passenger traffic growth slowed to 17% year-on-year in May, the slowest annual increase reported in May for four years, according to the Directorate General of Civil Aviation. Spot airfares in May and June were up around 10-12% over the same period last year, the Financial Express reported.
The price of aviation turbine fuel went up 38% year-on-year in May, as against 19% in April. Airlines are not surprisingly looking to pass on the higher cost of fuel by increasing passenger and excess baggage fares.
However, at the same time, airlines are also cautious not to affect their market share and hence are unable to pass on the entire jump in fuel costs. This has increased pressure on their margins and could affect their performance in the current quarter.
Meanwhile, most low-cost carriers have increased excess baggage fares and flyers have to pay extra if they are carrying more than 15 kg. FIndiGo, SpiceJet and GoAir are now charging 400 rupees for each kilo of excess baggage.