Air India adds Rs 1,200 fuel surcharge as jet fuel hits Rs 137
From Friday, October 9, a flight out of India for Diwali carries a new line on the ticket. Air India, Air India Express and Akasa Air have raised or introduced fuel surcharges on domestic and international routes, joining IndiGo, which announced its second increase since March on Monday, for new bookings from Tuesday. A fuel surcharge is a charge added on top of the base fare, not folded into it, and it applies to fresh bookings rather than to tickets already paid for.
Numbers first. For the Air India group, the domestic surcharge now runs from Rs 400 to Rs 1,200 depending on how far the flight goes, against Rs 299 to Rs 899 under the distance-based structure introduced in April. Across the five distance bands, that is a rise of 34 per cent to 60 per cent, with the steeper increases on the middle distances rather than the longest.
The bands, in detail. A flight of up to 500 km carries Rs 400. From 501 to 1,000 km the charge is Rs 600. From 1,001 to 1,500 km it is Rs 850, and anything longer carries Rs 1,200. The group first tried a flat Rs 399 surcharge on domestic flights in March, then moved to distance bands in April. This week's revision is the second change to that structure.
On international routes the group raised charges from the levels set in July. North America and Australia moved to 215 dollars from 200, a rise of 7.5 per cent. Europe, including the UK, moved to 135 dollars from 125, or 8 per cent. West Asia and the Middle East moved to 55 dollars from 50, or 10 per cent. The new international charges are still below the April peak, when the North America and Australia surcharge reached 280 dollars.
Akasa Air replaced its duration-based domestic charge with a distance-based one: Rs 375 up to 500 km, Rs 600 for 501 to 1,000 km, Rs 900 for 1,001 to 1,500 km and Rs 1,150 beyond that. On international flights Akasa has set a flat Rs 2,500 on services to Kuwait, Qatar, Saudi Arabia, the United Arab Emirates, Thailand and Vietnam.
The reason sits upstream, in the fuel. Aviation turbine fuel, the jet fuel airlines burn, rose in Delhi by about Rs 16 a litre on October 1, to Rs 137 from Rs 121. It was the third straight monthly rise, after Rs 5 in August and Rs 6.28 in September. Fuel is 30 to 40 per cent of an airline's operating cost, so a jump of that size moves the whole cost base, and it is the one input an airline cannot decide for itself.
The rise traces to the West Asia conflict that began in late February, when Israel and the United States attacked Iran, and to the pressure that has kept crude and refined fuel prices elevated since, including longer flight paths and airspace restrictions. Cirium data put jet fuel prices up 32.7 per cent between February and September. Air India said in its statement that fuel has seen significant volatility driven largely by geopolitical developments and sustained pressure on global energy markets.
What a household actually pays is the surcharge plus the fare underneath it, and that fare was already climbing before this week. Average one-way fares on tickets booked for travel between September 1 and November 10 are up 68 per cent year on year on the Delhi to Hyderabad route, 51 per cent on Mumbai to Kolkata, 39 per cent on Delhi to Goa and 37 per cent on Mumbai to Bengaluru, according to an Economic Times report.
Travel company Yatra puts current domestic fares 30 to 40 per cent above a year ago and international fares 30 to 50 per cent higher. Part of that is capacity rather than fuel. Airlines have trimmed their schedules for the October to December quarter, flying fewer departures with larger aircraft, which holds total seats broadly steady while removing options on the busiest sectors.
Demand adds to the pressure. The bookings are for the festive and year-end season, when households travel for Diwali, weddings and holidays. ixigo co-founder Aloke Bajpai said bookings to traditional destinations such as Goa remain strong, while Leh, Dehradun and Amritsar are also drawing more demand than usual.
The industry is pressing the government over the fuel bill. The Federation of Indian Airlines, which represents Air India, IndiGo and SpiceJet, has asked for a review of the jet fuel pricing formula, arguing that domestic ATF should be priced on the actual cost of the fuel plus a reasonable margin rather than on an international benchmark. Civil aviation minister K Rammohan Naidu said on Tuesday that the government is in discussions with airlines and oil marketing companies over high ATF prices, and a senior official said a revival of the ATF price stabilisation fund is under consideration.
There is precedent for that. In June the Union Cabinet cleared one-time budgetary support of up to Rs 10,000 crore for oil marketing companies to stabilise ATF prices and support domestic airlines, but carriers were not keen to use the facility and the scheme has lapsed. Rating agency Crisil has said domestic airlines' operating profit may fall 10 to 15 per cent this fiscal on higher fuel costs and airspace curbs.
What the record does not yet settle is how much of a ticket is fuel and how much is capacity, or whether the new surcharge recedes if jet fuel does. The airlines describe the charges as a partial offset to a cost they carry, and the previous structure stayed in place for months even as the fuel underneath it moved. A passenger booking today pays the new line on the ticket, and how long that line stays is not something the current numbers decide.
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