Airlines likely to raise fares

New Delhi Oct. 31. With the recent hike in the price of aviation fuel and with no relief forthcoming from the Government on the extraordinarily high sales tax on fuel, domestic airlines are all set to raise fares.

At present, domestic carriers pay nearly 40 per cent more for aviation fuel than the international carriers do, and in a way, the Government is subsidising foreign travellers.

The private airlines are looking to the market leader, Indian Airlines, to fire the first salvo. IA sources told The Hindu that an across-the-board fare hike was imminent if the domestic airlines were to arrest their losses. The increase is likely to go up by 10 to 15 per cent.As the market is down, the Advance Purchase Excursion Fare (APEX) and other promotional offers will remain to attract the high-class Railway passengers. But the APEX fares are barely a drop in the ocean. For instance, of the 30,000 IA seats sold daily, barely 2,000 are sold as APEX fares. The hike will be on the full fare tickets.

Fuel accounts for nearly 30 per cent of the operating costs, especially for the old aircraft flown by IA/Alliance Air. Sources said the IA fuel bill, which was Rs. 677 crores in 1999-2000, had jumped to Rs. 1,100 crore last year. Besides, over the last four years, the Landing and Route Navigation Facilitation has increased by up to 25 per cent. The airlines are feeling the pinch because they are being forced to absorb the high input costs, and have written to the Ministry of Civil Aviation seeking "relief".

However, the Government — which can bail out the airlines and also the passengers in the process — has yet to take a decision on lowering sales tax on aviation fuel, which is as high as 39 per cent in Kerala.

The State Governments earn only Rs. 400 crores from sales tax on aviation fuel.

Maharashtra, which receives the maximum number of flights, earns only around Rs. 40 crores from fuel tax out of its sales tax revenues of Rs. 1,100 crore a year.

If it lowers the sales tax on fuel from 25 to say 4 per cent, as Andhra Pradesh has done, it would not lose much but the passengers stand to gain.

Apart from this, the Government has still not withdrawn the Inland Air Travel Tax (IATT), which is around 15 per cent of the basic fare and which was levied as a surcharge during the Gulf War in 1990.

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