Budget airline IndiGo announced on Thursday that it will levy a fuel charge on domestic and international routes starting Oct. 6 to offset rising jet fuel prices.
"The decision follows the significant increase in Aviation Turbine Fuel (ATF) prices, which have surged in the last three months with consecutive price hikes every month," the airline said in a statement.
ATF accounts for a substantial portion of an airline's operating expenses, necessitating a fare adjustment to address such a cost surge, it noted.
The fuel charges will be increased from Rs 300 to Rs 1,000 depending on the distance, though the company said it "remains committed to offer affordable fares to its valued customers".
IndiGo's announcement comes amid a jump in ATF prices, which make up 40% of an airline's operating costs.
State-owned fuel retailers hiked jet fuel prices on Sunday by 5%—the fourth straight monthly increase since July.
The ATF price was increased by Rs 5,779.84 per kilolitre, or 5.1%, in the national capital to Rs 1,18,199.17 per kl.
The increase comes on the back of the steepest-ever 14.1% increase (Rs 13,911.07 per kl) effected on Sept. 1, and an 8.5%, or Rs 7,728.38 per kl, increase on Aug. 1.
In light of this, the government slashed the levy from Rs 3.5 per litre to Rs 2.5 per litre on ATF last month.
ATF and other petroleum products respond to changes in global crude oil prices, which have witnessed a sharp rally in recent months thanks to tight supply and soaring demand.
The budget carrier is expected to benefit from a surge in air travel as India hosts the 2023 ICC Men's Cricket World Cup.
“Flight prices, particularly around peak periods like the India vs. Pakistan match, tend to rise significantly,” Nishant Pitti, chief executive officer and co-founder of EaseMyTrip, told BQ Prime. “Searches for travel and tickets have increased by 46% during the India vs. Pak match,” he added.
Surging passenger demand is translating into a spike in airfares for the 10 cities hosting the World Cup. “Flight prices for major destinations such as Ahmedabad, Mumbai, and Kolkata have experienced a surge of 40% to 60% in the past year,” said Pitti. “In other host cities, there have been increases of 20% to 30% in airfares.”
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