Fuel charge back from tomorrow; flying to get costlier this festive season

NEW DELHI: Flying is all set to get more expensive this festive season. Domestic market leader IndiGo will from Friday (Oct 6) levy a distance-based “fuel charge” ranging from Rs 300 to Rs 1,000 on all its

flights

due to the increase in aviation turbine fuel (ATF) prices. Other airlines are also likely to follow suit as the costing pressure has increased significantly due to the twin blows of pricier jet fuel and weakening rupee vis-a-vis as many operating costs like lease rentals and maintenance contracts are dollar denominated.

While comments were sought from other airlines, SpiceJet said it will also levy a fuel charge without giving further details.

“IndiGo is introducing a fuel charge on domestic and international routes, effective 12.01 am on October 06, 2023. The decision follows the significant increase in ATF prices, which have surged in the last three months with consecutive price hikes every month. ATF accounts for a substantial portion of an airline’s operating expenses, necessitating fare adjustment to address such a cost surge. Under this pricing structure, passengers booking IndiGo flights will incur a fuel charge, per sector, based on the sector distance,” IndiGo said in a statement.
Accordingly, IndiGo will levy a fuel charge of Rs 300 (taxes extra) for upto 500-km-long sectors; Rs 400 for 501-1,000 km; Rs 550 for 1,001-1,500 km; Rs 650 for 1,501-2,501 km; Rs 800 for 2,501-3,500 km and Rs 1,000 for 3,501 km and beyond.
Ameya Joshi,

founder of aviation analysis blog NetworkThoughts,

said: “ATF prices are up 5.1% over last month and up 2.32% over October 2022. Coupled with a sliding rupee, airlines are under pressure. The fuel charge will help a little, though not pass on the entire increase in ATF price.”
Indian carriers have long been requesting the government for excise relief on ATF to no avail. While a number of states have cut VAT on ATF, a handful — including Dehi that houses India’s biggest aviation hub — continue with very high rates. Indian carriers have historically faced high operating costs primarily due to steep ATF prices — caused by high base price and then even higher state and central taxes/duties on that.
The weakening rupee has compounded the problem. “The rupee weakening against the dollar by every Re 1 means an enhanced expense of Rs 75-80 crore for a mid-size airline and Rs 150-200 crore for a large airline in India. About 65-70% of our costs are dollar-denominated like aircraft lease/maintenance, foreign stations and GDS,” said an airline official.
The fuel charge comes at a time when India faces a supply side crunch with over 100 aircraft grounded as GoAir suspended operations this May; IndiGo has close to 50 planes grounded due to Pratt & Whitney engine issues; Akasa facing pilot exodus and cash-strapped SpiceJet operating much less than its schedule of flights. On top of that, Tata’s Air India group and IndiGo are unable to add planes at the required pace as Boeing, Airbus, engine-makers and others in the supply chain face constraints.
As a result, Jyotiraditya Scindia’s aviation ministry has allowed airlines to wet lease planes to tide over the supply side crunch even as demand skyrockets — something that led to an unprecedented hike in airfares this summer after Go collapsed. To avoid a repeat in the peak winter travel season that has started with the ongoing festivals, IndiGo has been allowed to wet lease 11 more single aisles on top of two widebodies. IndiGo is looking at more lease options. Air India has also been adding planes to meet the demand.