16-Mar-2011 10:50 AM

Indian carriers hike up fares to cover rising fuel cost

SpiceJet CEO Neil Raymond Mills stated that at current prices for crude, airfares must be increased by INR600-700 to break even, noting that the cost of aviation fuel as “unsustainable” for airline survival (The Hindu Business Line, 15-Mar-2011). Kingfisher Airlines’ has also increased the fuel surcharge with Chairman Vijay Mallya stating that the carrier has already been passing on the increasing fuel cost to passengers. “Despite this, there has been no reduction in load factors," he said. "Some of the cost will have to be passed on to the consumer and some of it will have to be borne on our own, we’ll have to manage it on a day-to-day basis.” Jet Airways has also “adjusted” the fuel surcharge to absorb rising ATF prices. All of the carriers have asked the government to reduce the sales tax on ATF.

Indian Civil Aviation Secretary: “The Ministry of Civil Aviation is well aware of the unfavourable fiscal environment for civil aviation. The Ministry will take up the issue of the recent hike in Service Tax with the Finance Ministry. We will also take up the issue of high taxes on ATF and we are in favour of including ATF under Goods and Services Tax (GST)”.

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