With oil companies hiking jet fuel prices by around 10 per cent yesterday, airlines like Jet Airways had decided to bite the bullet and hike the critical ATF surcharge component on short haul flights from Rs 1,800 currently to Rs 1,950 a ticket, and on long haul routes from Rs 2,000 to Rs 2,350 a ticket. The average surcharge stood at just Rs 900 in May 2007.

Speaking to The Indian Express today, low cost carrier SpiceJet also said it would hike jet fuel surcharges by a similar amount. “We have decided to hike our surcharge by Rs 150 a ticket for short-haul flights and Rs 300 a ticket for long-haul routes,” said SpiceJet chief commercial officer Samyukth Sridharan. “With this hike, our prices have jumped almost 35-40 per cent over the average fare at the same time last year.”

In May last year, the average price for a Mumbai-Delhi flight by low-cost carrier SpiceJet was roughly Rs 2,900. In the same month this year, the carrier’s average fare on the same route is around Rs 3,800-3,900. While base fares have remained constant or even declined in many cases, the blow has been dealt by fuel surcharges, which have straightaway added Rs 1,000 to the total ticket cost.

According to industry watchers, the increase in ticket prices for no-frills carriers like SpiceJet, IndiGo or Deccan as well as full-fledged service providers like Kingfisher or Jet, have been in the same range of around 30 per cent. “Compared to last year, there has been a 30 per cent rise in fuel costs for all airlines this year. Since fuel constitutes almost 40-50 per cent of the overall operating costs for all airlines, that’s a straight jump of 15 per cent in input costs for these airlines,” says Kapil Kaul, chief executive officer (Indian subcontinent and Middle East) at the Center for Asia Pacific Aviation.

The sharp spike in air ticket prices are likely to further slacken the pace of growth of the Indian aviation industry, which is already deep in the red and likely to face cumulative losses of $1 billion this year. In the January-March period of 2008, the domestic air passenger segment grew by just 11-12 per cent over the year-ago quarter. This is the lowest growth witnessed at any point in the last four years, which have seen some quarters showing robust growth of up to 45 per cent.

“We expect the growth to fall more in the coming few months. To deal with this capacity-demand mismatch, we are looking at giving about three of our soon-to-be-inducted aircraft on wet lease. So, our net capacity addition this year will be only three aircraft, even though we have ordered for six,” says Sridharan.

Jet’s chief executive Wolfgang Prock-Schauer had also said, “If we are not able to reduce input costs and reduce capacity, the result would be reduced growth and the financial viability will be jeopardised.”