Following a nearly 16% spike in jet fuel prices to an all-time high of Rs 1,41,232.87 per kilo litre in Delhi on Thursday, SpiceJet Chairman Ajay Singh has called for an increase in airfares.
Moreover, because critical cost components such as fuel, maintenance, lease rentals, and overhaul charges are priced in dollars, a declining rupee has increased the challenge for airlines.
“The sharp increase in jet fuel prices and the depreciation of the rupee have left domestic airlines with little choice but to immediately raise fares and we believe that a minimum 10-15% increase in fares is required to ensure that cost of operations are better sustained,” Ajay Singh said.
Airfares are already high primarily due to the government mandated floors, which regulates price beyond 15 days.
Jet fuel used to account for 40% of an airline's total cost. However, since the start of this year, jet fuel prices have risen every two weeks since the beginning of 2022. ATF prices have risen by roughly 55% since January 1, with nine rises totaling Rs 49,017.8 per litre (Rs 49 per litre). On Monday, the rupee broke through the 78-mark versus the US dollar for the first time.
While input costs are growing, airline executives are concerned that any pricing hike will result in fewer passengers. Passenger numbers have decreased after the previous two rounds of fare increases. The number of passengers dropped from 407,975 on April 17 to 339,175 on June 14.
