Summer airfares likely to soar

MUMBAI, India – Soaring fuel prices and rising passenger demand will make summer travel to international destinations costlier by 15%-20% from a year earlier, said aviation and travel trade experts.

Brent crude prices have been hovering near two-and-a-half-year high of $122 a barrel due to the West Asia crisis, pushing jet fuel prices by over 30% worldwide. This has forced international airlines to increase fuel surcharge, an extra amount added to an air fare to cover increased fuel costs – in April. Around 72 international airlines operate out of India.

The surcharge has risen by up to 25% in the past couple of months, according to travel industry experts.

Singapore Airlines has increased fuel surcharge by 16% from February. While Singapore Airlines charged 8,558 as fuel surcharge on a Mumbai-Singapore-Mumbai ticket in February, it charges 9,924 in April. The airline has added an additional $32 (about 1,400) on tickets sold after April 21.

Other international airlines such as British Airways and Emirates have also joined the bandwagon. British Airways has hiked its fuel surcharge by £10 (about 730) in April.

“Due to the current volatility of oil prices, Emirates is introducing a fuel surcharge to reflect the substantial recent increases in our fuel costs,” Emirates had informed its trade partners in a statement last week.

Emirates accounts for a lion’s share of outbound traffic from India, beating rival carriers such as British Airways, Lufthansa and Singapore Airlines. As jet fuel constitutes about 40% of an airline’s operating cost, higher fuel surcharge helps cover increased cost.

“Rising fuel cost is a worry so we have to make sure all capacities we employ are beneficial. Almost all airlines have increased fuel surcharge by few Euros but that is not compensating for the high fuel prices,” said Axel Hilgers, director, South Asia, Lufthansa.

“International travel will see a 20% increase in fares for the coming summer travel months,” said Ajay Prakash, president, Travel Agents Federation of India .

Growing demand for outbound and domestic travel is another reason for rising fares.

“Both the domestic and outbound travel industry is growing at 30% 25%, respectively, and we had forecast such a trend at the beginning of the year. We are also seeing an increase in air fares both on the domestic and international fronts due to hikes in fuel surcharges,” said Karan Anand, head – Relationships, Cox and Kings.

Industry pundits feel demand and supply will determine the pricing for the peak summer months.

“Seats to Europe, Hong Kong and America in the economy class are all sold out. To maximise yields from the remaining seats is what the airlines will look for. It will be a function of demand and supply. For example, a London round trip that is available for 45,000 will cost an additional 10,000 – 12000 or more on weekends,” Mr Prakash said. According to travel trade experts, the levy of increased service tax from April 1 on economy class seats on international routes (750) is also marginally impacting the pricing of tickets.

“Added service tax by the government on the economy class tickets will also have a marginal impact on prices. Airline seat load factors are high and this is the reason that airlines are demanding higher price on available seats. Most aircraft are going at an 80% load factor,” said Ashwini Kakkar, executive vice-chairman, Mercury Travels.