The Telegraph
Since 1st March, 1999
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Foreign fares spiral

New Delhi, Oct. 9: As domestic air travel gets more expensive, so will foreign jaunts.

British Airways and Virgin Atlantic today joined Lufthansa and Air France in increasing fuel surcharges as oil prices soared to $53 a barrel.

Thursday onwards, the surcharge on tickets of long-haul flights of both the British airlines would go up from '6 to '10 one way. That would translate into about Rs 650 more on a return ticket.

Virgin said fuel represented 22 per cent of the airline's costs and the surcharge would be about 3 per cent of average ticket prices.

Lufthansa has already announced that on long-haul routes, where fuel accounts for a higher percentage of costs, the surcharge per flight leg will increase by 10 euros to 17 euros. That means an increase of over Rs 1,100 for a long-distance return ticket.

The German carrier has said the new rates apply to all tickets bought on or after October 15 and will remain in force until the crude oil price falls below $40 per barrel on 30 successive days.

Air France will similarly increase prices by 11 euros (about Rs 600) each way. Again, the hike will be reversed if crude prices fall below $40 a barrel and stay there for 30 consecutive days.

Analysts fear that a prolonged rise in oil prices could trigger a slowdown in global economic recovery. If this happens, airlines could suffer further as less essential business travel and holiday plans are sure to be cut back. Air France and Lufthansa have already scaled back short-term growth forecasts.

'Higher oil prices could dampen economic growth and consumer demand as people hold on to their purse strings fearing higher doses of inflation,' said B.B. Bhattacharya, the director of the Institute of Economic Growth.

Air turbine fuel prices had hit an all-time high of Rs 31,000 a kilolitre in October, compared with Rs 27,000 a kilolitre in June-July. Global trends indicate oil prices will remain firm in the coming months and airlines fear there may be a need for another round of fare increase in November-December.

The aviation industry is likely to be hit more than others by the rise in oil prices as it comes on top of a series of calamities over the last few years. Airlines went into a tailspin with huge cancellations after 9/11. A tentative recovery in 2002 was reversed the following year by the Sars epidemic. All three primary domestic carriers ' Jet, Sahara and Indian Airlines ' yesterday announced a 10 per cent increase in fares effective from Thursday.

But one airline is swimming against the tide. The low-cost Air Deccan today announced a 20 per cent fare reduction on its metro routes. Chief captain G.R. Gopinath said 'incremental revenue from very high passenger traffic will offset the cost of increase in the price of aviation turbine fuel'.

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