Skift India Report: Airfares Set to Go Up as Indigo Levies Fuel Charge
10.10.2023 - 08:41
/ skift.com
/ Peden Doma Bhutia
Low-cost carrier Indigo has now introduced a distance-based fuel charge on domestic and international routes.
Why This Fare Hike? The decision follows the significant increase in Aviation Turbine Fuel (ATF) prices, which have surged in the last three months with consecutive price hikes every month, the airline said.
“ATF accounts for a substantial portion of an airline’s operating expenses, necessitating far adjustment to address such a cost surge,” Indigo said in the statement.
The Fuel Hike Saga: In the fourth straight monthly increase since July, the price of Aviation Turbine Fuel (ATF) or jet fuel, was hiked by 5% on October 1 to INR 118,000 ($1417) per kilo liter. On September 1 the government announced a 14% increase in ATF pushing the price to INR 112,000 (41345) per kilo liter. This ad marked the highest point since December 2022.
While highlighting the healthy recovery of India’s air passenger traffic for August, aviation research firm ICRA had last month talked about the challenges stemming from elevated ATF prices and the depreciation of the INR against the US dollar compared to pre-Covid levels.
How Does it Affect Airlines? ATF constitutes almost 40% of operating expenses for airlines, thereby making them significantly sensitive to such fluctuations.
Under this pricing structure, passengers booking Indigo flights will incur a fuel charge, per sector, based on the distance.
The country’s largest carrier in terms of market share and fleet size, the airline, reassured its customers of its commitment to offering affordable fares. The airline will be publishing the tariff sheet subsequently, with the sector-wise charges.
Other carriers are also expected to follow Indigo’s footsteps and hike airfares.
We read travel research firm Videc’s India Travel Market Sizing report and here’s what we found out:
Factors Driving OTA Growth:
Top Indian OTAs:
Diversification of OTAs:
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