The Telegraph
Since 1st March, 1999
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Pressure on air fare

New Delhi, March 13: Air-India is likely to impose a flat surcharge of $2 on its published fare. Domestic airlines are naturally likely to follow suit and slap a similar surcharge.

Several global airlines have already started charging a fuel surcharge on tickets to make good the sudden spurt in aviation fuel prices.

Air-India, which held a meeting of its board in Mumbai today, wanted to raise fares by 5 per cent, but civil aviation minister Shahnawaz Hussain is reported to have shot it down. Hussain has also not favoured another proposal by the domestic airline leader, Indian Airlines, to raise fares on local routes by 8-10 per cent. If Indian Airlines manages to wrest the fare hike, its smaller rivals will follow.

In a related development, the Cabinet Committee on Security decided that from July 1, ground handling at airports in the country would be done only by Indian agencies like the Indian Airlines, Air-India and the Airports Authority of India, reports PTI.

Hussain feels neither of these hikes is justified and neither will stand the test of competition, especially as the impending Gulf war is sure to lead to a drop in air travel, thus creating huge spare capacities.

Airlines are suffering badly from the huge increases in air turbine fuel costs, which have shot up by over Rs 5,000 a kilolitre over the last three months. It is now being quoted around Rs 25,200 a kilolitre.

Instead of allowing airlines to raise fares, the civil aviation ministry is now lobbying with the finance ministry to take turbine fuel off the concurrent tax list and place it on the Central list, so that only Central sales tax can be levied on it.

Currently, local levies make the turbine fuel very costly. Domestic airlines are citing this as the main reason for the difference between international fares per kilometre and domestic fares, which are 35-40 per cent higher.

At today’s meeting, the Air-India board approved plans to increase capacity by about 20 per cent this fiscal -- either through purchasing planes or leasing.

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