Fuel Surcharge cut may not benefit passengers soon

Following a reduction in the price of aviation turbine fuel (ATF), most airlines are adopting a wait-and-watch policy before taking a call on whether to pass on some quantum of the drop to passengers. Though Delhi-based low-cost carrier SpiceJet announced a 50% reduction in fuel surcharge, legacy carriers such as Jet Airways, Indian Airlines and Air Sahara are unlikely to drop fares immediately to help cushion a part of the fog-related costs due to higher fuel burn, flight disruptions and cancellations over the next couple of months. Reacting to the ATF price cut, SpiceJet announced that it would slash fuel surcharge by 50%. From December 1, fuel surcharge for long-haul destinations will be Rs 200, as against Rs 400 earlier, while for any travel less than 1,000 km, the surcharge will be Rs 100.

Jet Airways COO Peter Luethi said fogrelated flight delays and disruptions in the months of December and January could easily lead to 5% to 7% jump in operational expenses, largely due to fuel burn while circling airports. “We have to factor in the additional expenses due to traffic congestion in mid-air before taking a call,” he added. Air Deccan, too, has no immediate plans to tweak fares. “We did not impose any fuel surcharge, so there is not much scope for reduction in fares. We also have to factor in costs due flight disruptions owing to fog,” said Air Deccan’s Captain GR Gopinath. Industry analysts said only if market leaders like Jet and Indian Airlines juggle fares will other players react. More so, in the peak travel season of December and January, when demand for air travel is more than supply, industry executives feel that at best there could be some special holiday offers in the coming weeks.

“Only post January 15, when there is some easing of demand, will we see fares going southward. That too, if ATF prices continue to remain low,” said Centre of Asian Pacific Aviation’s Kapil Kaul. The Centre of Asian Pacific Aviation is an industry think tank. Going by their bookings, most legacy carriers expect to report near 80% load factor in December, with low-cost carriers hovering in the 90%-mark. With cheap tickets already sold out, air fares are now in the top fare basket. So despite the Rs.4,000 drop in jet fuel prices, there is only likely to be marginal drop in passenger fares, if any.

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