Now, travelling on air has become costlier as major airlines have hiked their airfares up to 10% on the back of not getting any relief from the states in account of aviation turbine fuel (ATF), on which state governments have decided not to reduce the sales tax on ATF as against Centre’s recommendation.
India’s big budget major airline companies including Air India, Kingfisher and Jet Airways have announced to hike the airfare by 10% from Friday night. This move of airline companies came in the response of state run oil companies move to raise the ATF prices by 2.8%.
Besides, the state governments are also not willing to reduce the levy taxes which domestic airlines attract custom duty at 10%, excise duty at 8% and sales tax at 4%. Meanwhile, Andhra Pradesh and Kerala have already scrapped the sales tax following the Union Aviation Ministry’s proposal.
The Union Aviation Ministry has proposed the state governments not to impose the sales tax on ATF as its price was continuously growing high due to rising demands and less supply.
The international airlines on the other hand, do not need to pay the local tax on refueling as per aviation norms. According to aviation data, over 40% operating cost of domestic airlines is spent on ATF while International players have to spend only 20% for the same.
Commenting upon the price rise, Air India spokesperson said, “ATF prices depend on demand and supply and the dynamics of the market. The market is extremely volatile currently. Airfares have to be hiked to meet the operational costs.”
On the other hand, the empowered committee (EC) of the state finance ministers has argued that airline companies have already passed the heavy fuel surcharge to customers and refurbishing their losses.
Since last two years ATF prices have become more than doubled which has badly affected the profit margins of the aviation industry.
However, the hikes in airfare till now have had only in big budget airline carriers not in the economy budget carriers that control 25% of aviation market share.
Earlier, Deccan Airlines, the subsidiary of Kingfisher have hiked the airfare by 10% on Thursday but a day after hiking it resumed its old airfare on Friday because of losing out number of passengers.
Other small budget airlines, which are following the ‘wait and watch’ strategy, have not revealed their card and holding the old airfare.
According to sources, an official of small airlines have said that any fare increase at this moment would affect the response of flyers when jet fuel prices have only gone up by 3 per cent and our models are totally different, so there needs to be a difference in airfares too.
Besides, Air Deccan, IndiGo, SpiceJet, GoAir and Jetlite are major small budget domestic airlines in the country.
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