Airlines to keep levying surcharges

Bangalore: Even though oil companies have cut Aviation Turbine Fuel (ATF) prices by around 20% in the recent past, airlines refuse to make a corresponding reduction in fuel surcharge, which was first introduced early last year to counter the impact rising oil prices on their operational cost.
For now, carriers have said they will not touch the levy till at least the next quarter. And this month’s marginal hike in ATF prices has only assisted them in arriving at the decision.
Fuel surcharge was first levied by domestic carriers early last year after global crude prices soared past $70 a barrel. It started with Rs 300 and was then raised to Rs 500. This was hiked two more times by Rs 150 and Rs 100. Currently, airlines are charging Rs 750 as fuel surcharge.
Besides this, a congestion surcharge of Rs 150 is also embedded in airfares. A budget airline executive informed that these two levies (Rs 900) cover around 25% of their per-seat operational costs.
Analysts believe the two additional charges provide a cushion to airlines against cut-throat competition on fare front to some extent.
“They have now got used to this cushion. It assures them of some recovery on their cost. But this can go on only till there is consensus on it from all of them,” said an analyst.
22/01/07 Praveena Sharma/Economic Times

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