Airfares set for rise as ATF prices skyrocket

- The hike comes on the back of a marginal 1.3% cut in rate earlier this month

- ATF makes up to 40% of an airline's operating cost

- Brent trading at $119.16/bbl

- Re depreciated against USD making imports costlier

New Delhi: The sharp increase in aviation turbine fuel (ATF) prices and the depreciation of the rupee have left the domestic airlines with no choice but to immediately raise airfares, said Ajay Singh, Chairman and Managing Director, SpiceJet, on Thursday. A minimum 10-15 per cent increase in air fares is required to ensure that cost of operations are better sustained, Singh said in a statement. The ministry had imposed lower and upper limits on domestic airfares based on flight duration when services were resumed on May 25, 2020, after a pandemic-forced two-month lockdown.

For example, airlines currently can't charge a passenger less than Rs2,900 (excluding GST) and more than Rs8,800 (excluding GST) on flights with duration of less than 40 minutes. The lower caps were imposed to help the airlines tide over financial loss suffered due to travel restrictions. The upper caps were imposed so that passengers are not charged huge amounts when the demand for seats is high. The fuel prices have been rising since the Russia-Ukraine war broke out on February 24. In his statement on Thursday, Singh said that the ATF prices have increased by more than 120 per cent since June 2021. "This massive increase is not sustainable and governments, central and state, need to take urgent action to reduce taxes on ATF that are amongst the highest in the world," he said. SpiceJet has in the last few months tried to absorb as much burden of this fuel price rise, which constitutes more than 50 per cent of our operational cost, as we could, he said. "The weakening of the Indian rupee against the US dollar further significantly impacts airlines as our substantial cost is either dollar denominated or pegged to the dollar," he added.