Airlines declaring fare hikes isn’t the best way to lure potential customers, but surging fuel costs are forcing some to warn their passengers about the inevitable. India’s low-cost carrier SpiceJet has told it’s finding it increasingly challenging to contain ticket costs, adding that passengers could soon bear the burden of costly airline operations.
SpiceJet’s Chairman and Managing Director Ajay Singh
SpiceJet’s Chairman and Managing Director Ajay Singh are not mincing words about the carrier’s inability to keep fares under check any longer, telling that a minimum of 10-15% growth could be seen immediately. He blames the sharp rise in aviation turbine fuel (ATF) and the weakening of the Indian currency as the primary reasons behind this, telling,
“ATF prices have raised 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”
- “The weakening of the Indian rupee against the US dollar further significantly impacts airlines as our substantial price is either dollar denominated or pegged to the dollar.”
The budget airline expects a minimum 10-15% increase in airfares.
As the pandemic loosens its grip over the world, rising fuel price, partly driven by the Russia-Ukraine conflict, has appeared as the latest roadblock toward aviation recovery. It becomes even trickier in a highly price-sensitive market like India, where passengers take their business elsewhere at the slightest difference in airfare.
As unpleasant as Singh’s warning sounds, it’s not entirely surprising. Fuel prices have been on an upward trajectory since the beginning of the year. India is particularly vulnerable as it is 85% dependent on imports to meet its oil needs. Furthermore, jet fuel makes up almost 40% of the running cost of an airline in the country.
India’s aviation minister Jyotiraditya Scindia
It’s precisely for this reason that India’s aviation minister Jyotiraditya Scindia appealed last month to the central government to lower the taxes on fuel.
Surprisingly, passengers seem somewhat resilient to the gradual hikes over the last few months, if various surveys and statistics are to be believed. Indian carriers are adding more capacity, exceeding pre-pandemic levels as need for travel surges.
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The trend is not just restricted to India. The largest aviation market in the world – the United States – is also going through something similar. Delta Air Lines CEO Ed Bastian told at an industry conference recently that despite summer fares being 30% higher than pre-COVID days, the demand is off the charts.
SpiceJet hasn’t been able to generate much confidence lately, and the latest announcement hasn’t benefited much either. The carrier’s stock fell over 3.5% on the Bombay Stock Exchange following Singh’s comment.
Owing to shaky finances, the airline already works on a cash and carry model in several airports, which needs it to pay cash upfront before using its services. Furthermore, reports of passengers complaining about shabby plane interiors, inadequate MAX pilot training, and the numerous court cases it has been involved in don’t quite paint a rosy picture.
Still, the LCC would hope to ride the wave of high passenger need to offset any setbacks due to the fuel price surge.
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