Coupled with the recent terror attacks in Mumbai which will hit air traffic, this step by Air India (merged with the old Indian Airlines), will definitely increase the pressure on private carriers Jet and Kingfisher to reduce air fares by pruning the fuel surcharges.
Air India announced a reduction in fuel surcharge for all domestic sector flights by INR 400 with effect from 02-Dec-08. The fuel-surcharge is presently INR 2,350 for sectors below 750 kms and INR 3,100 for sectors over 750 kms. The average reduction in fuel surcharge will be over 14.5%.
The cut-back in fuel-surcharge is a consequence of the reduction in ATF prices from Sep-08 onwards, including the reduction announced by Oil Companies for Dec-08. Domestic air travel demand has been slow in recent months, and the reduction in fuel surcharge is expected to stimulate domestic air travel market during the winter peak season.
Mr. Raghu Menon, Chairman and Managing Director, Air India, said, “We have decided to bring down the fuel surcharge, now that crude prices have fallen globally, thereby bringing down ATF prices. Although crude prices are still volatile, we hope it will stabilize at the current levels, so that there is a short to medium term relief in ATF costs. This decision takes into account the reduced prices of ATF announced for the current month by the Oil Companies. While the airlines are no doubt going through difficult times, it is necessary for us to react positively to pass on some concession to passengers and generate demand.”