Domestic Airfares Spared Steep Hike, International Tickets to Rise Further
Domestic air travelers in India have been temporarily spared from significant airfare increases, as oil companies did not fully pass on the impact of higher crude prices. However, international tickets for western destinations are expected to climb further, having already doubled since the start of the Iran war, due to airlines taking longer routes.
Government Caps Domestic ATF Hike to 25%
After a series of fluctuations throughout Wednesday, the government limited the increase in aviation turbine fuel (ATF) base price for domestic flights to 25%. Officials warned of potential interventions if fares rise unreasonably. In contrast, the jet fuel base price for international sectors has more than doubled over the past month.
The day began with domestic and international ATF prices rising by 115% and 107%, respectively. Within hours, oil companies clarified that the hike for scheduled airlines was lower. By late afternoon, the government pegged the increase in base price at 25% for domestic operations.
IndiGo Revises Fuel Surcharge Structure
By evening, IndiGo had revised the fuel surcharge it introduced on March 13. Effective from April 2, only short domestic flights covering distances up to 1,000 km will see a reduction from the earlier flat surcharge of Rs 425. All other flights, including longer domestic routes and those to the UK and EU, experienced increases of up to Rs 7,700. Previously, domestic flights faced a uniform surcharge of Rs 425, regardless of distance.
Other airlines, such as the Air India Group and Akasa, are likely to follow suit. To avoid allegations of collusion, Indian carriers typically stagger the levy or hike in fuel surcharges, which made a comeback last month.
Impact on Operating Costs and Government Monitoring
IndiGo stated, IATA’s Jet Fuel Monitor indicates over 130% increase in fuel prices for the region on a month-on-month comparison. We have re-calibrated the domestic fuel charge to vary by different travel distances. Without the government limiting the domestic ATF hike, increases would have severely impacted the affordability of domestic air travel. For international operations, ATF prices have more than doubled in the last month, impacting the airline’s operating costs on these routes.
With several key elections approaching, the government is closely monitoring domestic airfares. Asangba Chuba Ao, joint secretary in the aviation ministry, said, Limiting the domestic ATF hike to 25% will ensure domestic operational costs of Indian carriers remain manageable. This prevents a potential industry-wide crisis and allows airlines to maintain competitive pricing for domestic travelers, avoiding additional fuel surcharges that would have been necessary under a market-linked pricing mechanism. If there are any abnormal fare surges, we will intervene.
Uncertainty for Oil Companies
Oil companies are still awaiting clarity on the financial impact of the staggered increase in ATF prices. Sujata Sharma, joint secretary in the oil ministry, noted that the staggered increase in prices and the timeline for the next revision are policy matters, and the government will decide at an appropriate time.
This development highlights the delicate balance between managing fuel costs for airlines and protecting consumers from excessive fare hikes, particularly in the domestic sector, while international travel faces ongoing challenges due to geopolitical tensions and route changes.
