The Hindu Business Line : As crude rises, airlines unlikely to cut fuel surcharge

New Delhi, Jan. 4 The upward movement in global prices of oil could see the domestic airline industry do a rethink on the earlier proposal to lower the fuel surcharge following a reduction in aviation turbine fuel prices. Earlier this month, Indian Oil Corporation (IOC) had lowered the price of ATF at the four metros by about 4 per cent as compared to the previous month and this had led to the possibility of some airlines reducing the fuel surcharge.

On January 1, IOC announced that an airline refuelling in Delhi would be charged Rs 45,495.82 per kilolitre (down from Rs 47,444.14 in the previous month), while in Chennai it would pay Rs 49,372.63 per kilolitre (Rs 51,425.19 .

However, after IOC reduced ATF prices, the global price of crude crossed $ 100 a barrel mark before coming back marginally to $ 99 a barrel.

Not the right time

The Chief Executive Officer of Jet Airways, Mr Wolfgang Prock-Schauer, told Business Line that with crude prices touching record high levels in recent times, the airline “would like to assess the situation further before making a move on the fuel surcharge.”

SpiceJet’s Mr Siddhanta Sharma also felt that the current moment might not be the most opportune to lower the fuel surcharge.

Mr Bruce Ashby from IndiGo said that his airline was still thinking about the fuel surcharge. The Officiating CEO, Air Deccan, Mr Ramki Sundaram, felt that there was unlikely to be any decline in fuel surcharge given the increase in fuel prices.

At the moment, most airlines impose a surcharge of Rs 2,025 to offset the increase in fuel prices as ATF accounts for 30-35 per cent of their operating costs. During 2007 itself, the airline industry increased the fuel surcharge four times.

Advance bookings

The airline industry has another reason for not lowering the surcharge just yet. “At least 40 per cent of the bookings made by some airlines are done well in advance. So how do we refund the difference in fare if the surcharge is lowered,” argued an airline official.

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