Air India's domestic fares to go up 10 per cent

New Delhi: The unified airline that was born out of the merger of Air India and Indian (or Indian Airlines as it was previously known), the National Aviation Company of India Ltd (NACIL) is looking at increasing its fares by 10 per cent on domestic sectors.

The largest airline in India, NACIL may also hike the fuel surcharge on international routes.

The proposed hikes are reported to be propelled by the domestic oil marketing companies (OMCs) such as IOCL, BPCL, and HPCL increasing the price of jet fuel due to soaring global crude oil prices. In recent days, oil prices have hovered around $120 a barrel, with no signs of coming down anytime soon. Consequently, the cost of aviation turbine fuel (ATF) has also gone up by around 35 per cent over the last six months.

Over the past year, the basic fares have remained static for most airlines, though they have passed on the increased costs of aviation turbine fuel to their customers by charging a higher fuel surcharge. In May 2007, the surcharge was at Rs900, while currently it is at Rs2,350. 

Competitors from the private sector, such as domestic market share leader Jet Airways, have started to hike their basic fares. Jet increased its basic fare by 10 per cent, starting 3 May. Reports suggest that the increase in ATF prices last year made Jet shell out an extra $6 million per month on fuel, which is one of the biggest costs in airline operations, contributing to 40 per cent of its operating costs.

Historically, Air India has followed price hikes that have been initiated by Jet Airways. The unified Air India brand commands a market share of around 16 per cent of the domestic market, making it the second biggest after Jet Airways.